The international oil benchmark, Brent crude, rose by over five percent on Thursday as the Organisation of the Petroleum Exporting Countries (OPEC) and its allies agreed to extend oil cuts by one month into April.
Brent crude, against which Nigeria’s oil is priced, rose by $3.03 to $67.10 per barrel as of 8:30pm Nigerian time on Thursday.
Recall that the 2021 budget signed by President Muhammadu Buhari was based on an oil price benchmark of $40 per barrel and a production level of 1.86 million barrels per day.
Since last month ( February 2021), brent (against which Nigeria’s crude oil is priced), had traded at an average that was higher than $60/barrel. It traded for $63.81/barrel on Thursday.
Data released by Nigeria’s Federal Ministry of Finance, Budget and National Planning on Thursday showed that it traded at $65.18/barrel, $66.71/barrel, $67.15/barrel and $66.26/barrel on February 23, 24, 25 and 26, respectively.
This indicates that the Nigerian Government has been earning an additional amount of about $20/barrel when compared against the 2021 budget benchmark of $40/barrel.
Also, the Finance Minister, Zainab Ahmed had stated in January that crude oil production was projected to increase from 1.8 million barrels per day in 2020 to 1.86mbpd in 2021, as economies recover from the recession, and moderated by OPEC+ quota agreements.
“Although Nigeria’s total production capacity is 2.5mbpd, current crude production is about 1.7mbpd, including about 300,000bpd of condensates, which indicates compliance with OPEC quota,” she had stated.
Going by the Minister’s statement, Nigeria’s crude oil production without condensate would be 1.4mbpd.
With an additional $20/barrel income, when marched ag
ainst a benchmark of $40/barrel, it means that the government’s earnings in the past 30 days from the sale of 1.4mbpd crude oil, at an official exchange rate of N379/$, is about N318.4bn.
This implies that the Federal Government has been earning more from crude oil in the past 30 days than it projected in its 2021 budget.
In as much as the booming oil price, suggests increased revenue for Nigeria which depends on crude oil for about 50 percent of its revenues and over 90 percent of export earnings, it (rising oil price) also means increased cost of petroleum products as the country depends largely on imports due to a lack of domestic refining.
About the OPEC+meeting
OPEC and its allies, a group called OPEC+ have agreed on extending the production levels of March for the month of April, excepting Russia and Kazakhstan.
“The ministers approved a continuation of the production levels of March for the month of April, with the exception of Russia and Kazakhstan, which will be allowed to increase production by 130,000 and 20,000 barrels per day respectively, due to continued seasonal consumption patterns,” the statement issued at the end of their 14th meeting on Thursday reads.
The meeting stressed the ongoing positive participation of the Declaration of Cooperation in supporting a rebalancing of the global oil market in line with the historic decisions taken in April 2020 to adjust downwards overall crude oil production and subsequent decisions.
OPEC said in a statement that the ministers noted, with gratitude, the significant voluntary extra supply reduction made by Saudi Arabia, which took effect on February 1 for two months, which supported the stability of the market.
The ministers also commended Saudi Arabia for the extension of the additional voluntary adjustments of one million barrels per day for April 2021, exemplifying its leadership, and demonstrating its flexible and pre-emptive approach.
The meeting reviewed the monthly report prepared by the Joint Technical Committee, including the crude oil production data for the month of February, and welcomed the positive performance of participating countries.
“Overall conformity with the original decision was 103 percent, reinforcing the trend of aggregate high compliance by participating countries,” OPEC said.
The meeting noted that since the April 2020 meeting, OPEC and non-OPEC countries had withheld 2.3 billion barrels of oil by the end of January 2021, accelerating the oil market rebalancing.
The meeting extended special thanks to Nigeria for achieving full conformity in January 2021, and compensating its entire overproduced volumes.
The Ministers thanked the Minister of State for Petroleum Resources, Timipre Sylva, for his shuttle diplomacy as special envoy of the JMMC to Congo, Equatorial Guinea, Gabon and South Sudan to discuss matters pertaining to conformity levels with the voluntary production adjustments and compensation of over-produced volumes.
They agreed to the request by several countries, which had not yet completed their compensation, for an extension of the compensation period until end of July 2021.
The meeting urged all participants to achieve full conformity and make up for pervious compensation shortfalls, to reach the objective of market rebalancing and avoid undue delay in the process.
It recognised the recent improvement in the market sentiment by the acceptance and the rollout of vaccine programmes and additional stimulus packages in key economies. (Source: aledeh.com)
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