Nigeria plans oil production cut by 1.7mbpd

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Nigeria plans to cut oil production to 1.7 million barrels per day (mbpd), from the 2.1 mbpd initially proposed in the budget, under an agreement brokered by the Organization of the Petroleum Exporting Countries (OPEC).

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The deal, which was reached after their virtual meeting on Thursday, April 9, 2020, will see OPEC member countries cut their output by 10 million barrels per day. Non-OPEC countries will also cut their production output by 5 million barrels per day.

Africa’s top oil exporter relies on crude sales for around 90% of foreign exchange earnings and more than half of government revenue.

Global crude oil prices have plummeted in the last few months. In March, the finance minister said the budget would be cut and the initial assumed oil price of $57 per barrel would be reduced.

“We are in the process of an amendment that is bringing down the revenue indicator to $20 per barrel,” said Ahmed in a web conference about the impact of low oil prices on the country.

In the meantime, the Nigerian Government has reacted to this development. In a statement issued by the Minister of State for Petroleum, Timipre Sylva, on behalf of the Federal Government, it was noted that Nigeria will adhere to the output cut in order to rebalance and stabilize the global oil market.

The country will join OPEC+ to cut supply by up 10 million barrels per day between May and June 2020, 8 million barrels per day between July and December 2020, and 6 million barrels per day from January 2021 to April 2022, respectively.

As a result of the output cut, Nigeria will now be producing 1.412 million barrels per day, 1.495 million barrels per day, and 1.579 million barrels per day respectively for the corresponding periods in the agreement; as against the 1.829 million barrels per day of dry crude oil that was the reference production in October 2018. This is in addition to condensate production of between 360-460 KBOPD of which are exempt from OPEC curtailment.

Naija247news understand that this agreement awaits the final outcome of the ongoing engagement with Mexico to agree on its full participation. This historic cut, when finally concluded and implemented, is expected to see crude oil prices rebound by at least $15 per barrel in the short term.

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