Members and non-members of the Organisation of Petroleum Exporting Countries (OPEC+), in a bid to ensure stability in the global oil market, have reached an agreement to cut crude oil production volumes. While Nigeria, Congo, and Angola are allowed to continue producing at their OPEC quota of 2023, Saudi Arabia, a key OPEC member, has voluntarily made an additional cut of one million barrels per day. This blog post delves into the details of the OPEC agreement and its potential impact on crude oil prices.
OPEC Production Cut Agreement:
During the 35th Joint Ministerial Monitoring Committee Meeting of OPEC held in Vienna, Austria, it was announced that OPEC+ members have agreed to cut crude oil production volumes. However, Nigeria, Congo, and Angola are exempted from these cuts and are allowed to produce maximally at their OPEC quota of 2023. The highest production volumes of these countries from November 2022 to April 2023 will be used as the basis for determining their production quota in 2024.
Saudi Arabia’s Voluntary Cut:
As part of the agreement, Saudi Arabia, a major oil producer, has decided to make an additional voluntary cut of one million barrels per day. This surprise move by Saudi Arabia holds significant weight in the overall deal. The agreement also includes an extension of voluntary cuts through 2024.
Nigeria’s Production Quota and Outlook:
Nigeria, one of the exempted countries, reached its highest crude oil production of 1.38 million barrels per day in February 2023. With the latest development, Nigeria can increase its production up to its current OPEC quota of 1.74 million barrels per day. Additionally, Nigeria’s production for 2024 will be capped at 10% less than its quota, subject to verification by independent secondary sources.
Optimism Surrounding Nigeria’s Production:
The Nigerian delegation expressed confidence that ongoing security interventions led by President Bola Tinubu would enable the restoration of the country’s production to 1.58 million barrels per day. They anticipate this will be complemented by condensate production of about 400,000 barrels per day. The delegation aims for Nigeria to reach a total crude oil and condensate production of approximately two million barrels per day by 2024.
Impact on Crude Oil Prices:
Crude oil prices were already experiencing an upward trend ahead of the OPEC+ meeting, and they increased further on Friday afternoon. Brent crude reached $76.32 per barrel at 4:20 pm, reflecting a $2.06 increase on the day. The production cuts and Saudi Arabia’s voluntary reduction may contribute to price stability and potentially support higher oil prices.
Bottom line :
The OPEC+ agreement to cut crude oil production volumes aims to stabilize the global oil market. While Nigeria, Congo, and Angola maintain their production at the 2023 OPEC quota, Saudi Arabia’s voluntary additional cut plays a significant role in the deal. The impact on crude oil prices remains to be seen, but the anticipation of stability and the potential for higher prices has already influenced trading.