OPEC’s Largest ‘Overproducer’ Just Got Its Production Quota Raised
Nigeria may face an easier task to finally fall in line with its share of the OPEC+ production cuts after OPEC has recently raised the African producer’s oil output ceiling.
OPEC has raised the quota for Nigeria to 1.774 million bpd, three OPEC delegates familiar with the matter told Reuters.
Until now, Nigeria’s cap as part of the deal was 1.685 million bpd.
According to one of OPEC’s sources, the higher quota given to Nigeria is due to the fact that the cartel had not factored in the newly launched production from the Egina ultra deepwater field which Total started up at the beginning of the year, expecting to pump 200,000 bpd at peak output.
Nigeria has argued that production from Egina is not part of the OPEC+ cuts.
Africa’s largest oil producer was formally included in the OPEC+ production cuts and compliance tracking this January, after being exempt from those cuts in the previous two years because of militant violence that frequently crippled its oil production and exports.
But since it became part of the deal, Nigeria has been one of the largest overproducers and non-compliant OPEC members in the deal. Nigerian overproduction has offset some of the cuts of its fellow OPEC members at a time when the oil market continues to be oversupplied with rising U.S. production and faltering oil demand growth.
In August, Nigeria pumped 1.866 million bpd, up by 86,000 bpd from July, according to OPEC’s secondary sources that the cartel uses to calculate official production and compliance rates.
Iraq and Nigeria—the two rogue members of OPEC that haven’t been complying with their share of the production cuts in recent months—pledged in September to fall within their respective caps while the cartel and its allies are trying to rebalance the oil market. Nigeria has promised to reduce its oil production by 57,000 bpd.
Nigeria is ready to make the sacrifice and cut its oil production deeper if OPEC and allies decide in December that it is necessary to deepen the cuts, Nigerian Minister of State for Petroleum Resources, Timipre Sylva, told Bloomberg in an interview last week, vowing that Nigeria would fully comply with its share of the cuts from October.
By Tsvetana Paraskova for Oilprice.com