Brent crude oil prices fell to as low as $82 per barrel for the first time since January 2022, after reports suggested that OPEC may be considering an increase in production.
An increase in crude oil production is often seen as a sign that prices could fall any time soon.
A Wallstreet newspaper report indicated that there were ongoing talks between Saudi Arabia and other OPEC members to consider raising production to about 500,000 barrels a day when it meets on December 4.
Disclaimers: However, on Monday night, Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman categorically denied reports that Saudi Arabia is discussing with other OPEC producers an increase in production of 500,000 barrels per day.
- This is according to Amena Bakr, OPEC’s chief correspondent through her official Twitter account.
- “If further action is needed by reducing production to balance supply and demand, we will always be ready to intervene.” Amena wrote, quote from Prince Salman.
- On October 5, 2022, when the price of Brent crude was at $93.25OPEC agreed to cut crude oil production by 2 million barrels per day from the month of November 2022.
- The decision was made due to the uncertainty surrounding the global economy and oil market outlook and the need to improve the long-term guidance for the oil market.
The Nigerian Context: Nigeria is struggling to meet its OPEC quota due to massive crude oil thefts and various other production challenges.
- The result is lower government revenue that has translated into larger budget deficits and dependence on the central bank to finance the government.
- Therefore, the fall in crude oil prices could worsen an already bad situation for Nigeria.
- In addition to the risk of widening fiscal deficits, Nigeria’s central bank relies heavily on crude oil prices to prop up its external resources.
- For example, data from the Central Bank of Nigeria shows that the country’s external reserves fell to $37.17 billion as of November 15, 2022, a one-year low.
Weighting in: As an oil and gas analyst, Dan. D Kunle told Naijaonpoint on Monday that Nigeria recorded over a million barrels of crude oil production in October 2022, for the first time since July 2022, is not worth celebrating.
- According to Kunle, Nigeria can do much better in crude oil production, “in fact, we should be producing up to 3 million barrels per day in Nigeria,” Kunle noted.
Back: Oil prices recovered after falling to around $87 a barrel as the market reacted to the denial from Saudi Arabia.
- This was also helped by comments from Saudi Arabian Energy Minister Prince Abdulaziz bin Salman that the current 2 million barrels per day will be maintained.
- “OPEC+’s current 2 million barrels per day cut continues through the end of 2023 and if further action is needed by reducing production to balance supply and demand, we will always be ready to intervene.”
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