Oil prices crossed the $80 mark following the decision by the Organization of the Petroleum Exporting Countries (OPEC) yesterday, confirming it would increase monthly overall production of oil by 400,000 Barrels Per Day (BPD) for the month of November.
Brent Crude traded at $81.49 around 4:40 pm local time, while Nigeria’s Bonny Light traded lower at $77.67 a barrel.
At the OPEC and non-OPEC ministerial meeting, the countries “reiterated the critical importance of adhering to full conformity and to the compensation mechanism taking advantage of the extension of the compensation period until the end of December 2021.”
Rising prices have triggered renewed calls — most notably from the United States — for OPEC+ to consider restoring production more quickly than planned.
Specifically, Nigeria is expected to pump 1.649 million barrels a day by next month, a quota the country has been having difficulty in attaining due to prevailing local challenges, until last month.
The Guardian had reported that production disruptions due to community unrest, maintenance and leak repairs have undermined the country’s capacity to produce optimally, despite requesting for additional volume.
OPEC’s latest Monthly Oil Market Report (MOMR) confirmed that Nigeria pumped 1.27 million barrels per day (mbpd) in August, lower than 1.38mbpd in July. Output however rose by 170,000 barrels per day (bpd) in September, according to Reuters survey.
According to the 2021 crude oil and condensate production report released by the Department of Petroleum Resources (DPR), difficulties in some oil terminals caused the decline in Nigeria’s oil output.
The Minister of State for Petroleum Resources, Timipre Sylva, had said the country’s full production capacity is closer to 2.2 million b/d, calling for an adjustment in OPEC+’s revised quota, the country has struggled to produce at its current allocation.
Sylva, according to Platts report, attributed Nigeria’s production struggles to technical problems from re-tapping reservoirs that had been shuttered to comply with the stringent OPEC+ cuts of the past 17 months and the said output could rebound to around 1.7 million b/d by November and 2 million b/d by end of the year.
“We had some issues from shutting down the reservoirs,” he said. “When you shut down a reservoir, to restart it, sometimes, there are challenges. The basis for giving us this quota was that Nigeria was in a crisis,” Sylva said. “Right now, we don’t have any crisis anymore, and we believe we can produce more.”
The current OPEC+ agreement targets a 400,000 b/d rise each month from August until April next year, and a 432,000 b/d monthly increase thereafter until last year’s cuts are fully unwound. The increases must be rubber-stamped at monthly ministerial meetings and can be paused for up to three months if market conditions warrant it.
OPEC+ members said that the outlook for crude demand in the first quarter of next year is uncertain. Yesterday’s decision is in line with the group’s tendency to be overly cautious.