OPEC is not happy with Nigeria right now and here’s why

Nigeria has been defaulting on crude oil cut agreements.

The Organisation of Petroleum Exporting Countries (OPEC) is putting off a meeting scheduled for June 4, 2020, because of member countries like Nigeria who have failed to comply with production cut agreements.

On Thursday, April 9, 2020 OPEC and its allies (referred to as OPEC+) agreed to cut global crude oil output by a record 10 million barrels per day, or about 10% of global output, in May and June.

The idea was to lift prices battered by plunging demand due to coronavirus induced lockdown measures.

Illustrative photo of an oil drilling process

Joe Raedle/Getty Images

If every member supplied crude oil to the international market in line with their capacities, there will be a glut and a further crash in the price of the product.

Nigeria and others have not been doing well

However, while some OPEC members like Saudi Arabia, Kuwait and the United Arab Emirates voluntarily adhered to output cuts of 1.180 million bpd, other members like “Iraq, Kazakhstan and Nigeria showed weak compliance with their output reduction targets in May,” Reuters reports. 

The plan was for OPEC members to cut global supply by up to 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.

Minister of State for Petroleum Resources, Chief Timipre Sylva (Punch)

Nigeria, which produces 1.829 million barrels per day, was asked to produce 1.412 million barrels per day, 1.495 million barrels per day, and 1.579 million barrels per day respectively for the corresponding periods, according to the agreement.

Reuters quotes one OPEC source as saying: “I don’t think there will be a meeting on Thursday. There are still many challenges.”

Should an OPEC meeting hold in the coming days, the discussions will be about stipulating new criteria for countries like Nigeria who have not fully complied with the oil cuts; and how they can compensate for their overproduction in the coming months.

Oil prices in the international market have risen from the doldrums experienced in April, largely due to the easing of lockdown restrictions across the world and the OPEC supply cut agreement.