By Yemisi Izuora/Ijeoma Agudosi-Lagos
Oil prices have plummeted lately, bringing economic relief to consumers but leaner revenues to oil-exporting nations such as Russia, Venezuela, and Nigeria.
The Organization of the Petroleum Exporting Countries (OPEC) debated cutting production, but leading exporter Saudi Arabia staunchly refuses to lower their production–no matter how low the oil price falls.
OPEC operates as a cartel to maximize profits for all the major oil-producing nations.
They work in partnership to increase production when demand is high and decrease it when the oil price falls too low to turn a profit but Saudi Arabia–which is world’s leading oil exporter–usually serves as the swing producer, adjusting their production to balance the oil price in OPEC’s favor.
However, Saudi Arabia has been reluctant to decrease production during the present oil price decline.
Russia Today reports, that Saudi Arabia remain firm in its desire to maintain market share–no matter how much it hurts other oil producers’ bottom lines.
In fact, Saudi oil minister Ali al-Naimi says that they would not cut production even if the oil price fell to $20 a barrel.
“It is not in the interest of OPEC producers to cut their production, whatever the price is,” Ali al-Naimi told the Middle East Economic Survey, a weekly oil and gas publication. Naimi added, “Whether it goes down to $20, $40, $50, $60, it is irrelevant.”
He added that he expects the oil markets to see marked volatility in the near future just as oil prices have fallen from $115 in June to ~$60 in December.
“We have entered a scary time for the oil market and for the next several years we are going to be dealing with a lot of volatility,” Naimi said. “Just about everything will be touched by this.”
Meanwhile, Nigerian crude oil exports in February are set to fall to around 1.87 million barrels per day (bpd) from around 2.03 million bpd in January, shipping lists showed on Tuesday.
This is just as the Kingdom of Saudi Arabia, the swing oil producer, has maintained that the Organisation of Petroleum Exporting Countries (OPEC) will not cut production even if the price of oil drops to $20 a barrel, adding that it will be unfair to expect the cartel to reduce output if non-members do not.
According to Reuters, Nigeria’s export levels for February are expected to be lower due to less of the benchmark Qua Iboe grade, traders said, citing expected maintenance by ExxonMobil at its Eket terminal.
However, exports levels were still higher than for much of 2014, as there was relatively strong production of other Nigerian grades such as Brass River (Agip) and Bonga (Shell).
Traders said the programme was not small enough to provide much support to differentials which remained around five-year lows.
In the meantime, OPEC will not cut oil production even if the price drops to $20 a barrel and it is unfair to expect the cartel to reduce output if non-members do not, Saudi Arabia has said