The Nigerian and Qatari governments have reached out to Saudi Arabia and Russia, the world’s two biggest oil producers and exporters, to cut oil output.
This is coming after Tuesday, February 23, meeting between President Muhammadu Buhari and Saudi Arabia King, Salman Bin Abdulaziz Al Saudi, during which they both committed to work towards a stable oil market and a “rebound of oil prices”,
A presidency source revealed that the decision to push for output cuts was an offshoot from the lukewarm reception by the markets to last week’s news of Russia and Saudi Arabia’s decision to freeze oil output as January levels.
According to the source, said the Nigerian government, while welcoming the decision to cap output by Saudi Arabia and Russia, the announcement was insufficient to raise crude prices due to the supply glut in the market.
He said: “By OPEC estimates, there is an excess inventory of some 1 million barrels per day, so the objective it to convince Saudi Arabia and Russia to each cut production by at least 500,000 barrels per day in order to lift prices.
“We are pushing for this because even though Iran, which is currently producing about 500,000 per day and is attempting to ramp up production to pre-sanction levels, we all know it will take some months before it can increase production and exports to 1 million barrels per day due to the absence of investments when the sanctions were in place over their nuclear programme.
“So the Minister of State for Petroleum, Dr. Ibe Kachikwu, is reaching out to Russia through back channels to go beyond the output freeze by taking 500,000 barrels off the market, while his counterpart in Qatar is talking to the Saudis to do likewise.
“The target is to remove 1 million barrels per day from the markets to support prices and see if oil can stabilise at $50 per barrel.”
The presidency official disclosed that the reason Russia and Saudi were being targeted was because they are the largest producers and can afford production cuts in contrast to smaller producers.
Buhari is scheduled to visit Qatar before the end of this week and is expected to hold talks with the country’s ruler on the issue.
However, attempts to get Saudi Arabia and Russia to cut output could prove to be a hard sell, as Saudi Arabia, which has remained adamant about retaining market share and taking out costlier US shale oil producers, on Tuesday again ruled out production cuts by OPEC.
The kingdom’s oil minister, Ali bin Ibrahim Al-Naimi, who spoke at the 35th annual HIS Energy CeraWeek convention holding in Houston, Texas, said keeping production at the January levels was the beginning of a long process to raise prices but restated that member countries would not cut production even if they say they would, according to USA Today.
“If we can get all of the major producers to agree not to add additional barrels, then this high inventory we have now will probably decline in due time.
“It is not like cutting production. That is not going to happen because many countries are not going to deliver. Even if they say they will cut production, they will not deliver.
“There is no sense wasting our time seeking production cuts. That will not happen,” he said.