Nigeria Supports Hold On Output Increase, As OPEC Divides On Decision 

Yemisi Izuora

Nigeria has voiced out its support to hold on to any decision that will lead to increase of oil output.

Nigeria’s position ran contrary to key oil producers who want output increase on argument of seeming demand recovery as a meeting of producers kicked off Monday.

The Organization of Petroleum Exporting Countries, OPEC+ oil producers were reportedly split on Monday over discussions of increasing output from February as some feared a hit from new coronavirus lockdowns while Russia and Kazakhstan said demand recovery justified higher production, five OPEC+ sources said.

OPEC+, which groups OPEC and other producers including Russia, met on Monday.

Two OPEC+ sources told Reuters that in the meeting Russia and Kazakhstan backing raising production while Iraq, Nigeria and the United Arab Emirates suggested holding output steady.

A day earlier OPEC Secretary General Mohammad Barkindo warned OPEC+ experts of downside risks facing the oil market.

On Monday, Saudi energy minister Prince Abdulaziz bin Salman said OPEC+ should be vigilant and cautious despite a generally optimistic market environment as demand for fuels remains fragile and the new variant of coronavirus is unpredictable.

“In many parts of the world, where infection rates have increased worryingly, a new wave of lockdowns and restrictions are being put in place, which will inevitably impact the rate of economic recovery in those countries,” he said.

The new variant of coronavirus, reported in Britain last month, is spreading globally and on Monday British Prime Minister Boris Johnson was scheduled to set out tougher lockdown rules.

With benchmark Brent oil futures holding above $50 per barrel, OPEC+ took the opportunity this month to raise output by 500,000 barrels per day (bpd) as it looks to eventually undue cuts that currently stand at 7.2 million bpd.

OPEC+ producers have been curbing output to support prices and reduce oversupply since January 2017, and cuts a record 9.7 million bpd in mid-2020 as COVID-19 hammered demand for gasoline and aviation fuel.

In previous meetings de facto OPEC leader Saudi Arabia has repeatedly suggested a cautious approach to restoring output while non-OPEC member Russia has backed a speedier increase.

On Monday, Russian Deputy Prime Minister Alexander Novak said there were still loads of uncertainties in the oil market and OPEC+ should remain flexible in its decision-making.

Benchmark Brent prices rose above $53 per barrel on Monday, touching their highest levels since March 2020, but later fell. [O/R]

“Under the current output terms, surpluses are expected from February until April, before demand recovers from May onwards, so a possible OPEC+ decision to not increase production will keep balances at a manageable level,” said Bjornar Tonhaugen from Rystad Energy.

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