June 6, 2023/CSL Research
According to news reports, the Organization of Petroleum Exporting Countries (OPEC) and its allies have agreed to extend earlier cuts in supply through the end of 2024 by a further 1.4million barrels per day (mbpd) to 40.46mbpd starting from 1 January 2024 to 31 December 2024. However, the group lowered the targets for Russia, Nigeria and Angola to bring them into line with their actual current production levels. By end June 2024, all OPEC+ countries will go through an assessment by three independent sources (IHS, Wood Mackenzie, and Rystad Energy) specialized in oil upstream to identify countries’ production capacities to be used for 2025 reference production levels.
Oil prices increased in April after OPEC+ announced a surprise cut in production, noting that its members will reduce output by about 1m barrels a day (c.3.7% of global demand). The 1m cut was in addition to existing cut of 2m barrels a day that was decided in November 2022 and planned to extend till the end of 2023. The oil production data released in April 2023, revealed that Nigeria saw an abrupt decline in output to 0.99mpbd, a 44.8% dip from
previously set quota of 1.81mbpd and a 24.4% dip from February’s 12month-high of 1.31mbpd, and a 20.6% dip from year-to-date output of 1.26mbpd.
The nation’s output had risen by 3.5% in February 2023 to 1.54mbpd, from 1.494 million barrels per day recorded in January, due to an improved battle against oil theft and other factors. Nigeria produced about 70% of its OPEC quota in Q1, 2023, with OPEC benchmarking Nigeria’s quota on 1.8 million barrels per day. However, production level had begun to drop again since March 2023. Nigeria has been unable to meet its OPEC production quota for over two years, hobbling the country’s main source of foreign exchange and putting immense pressure on its foreign exchange. We note that Nigeria’s dwindling production numbers continue to pose a threat to the country’s already high budget deficit of N12.1 trillion as the country continues to produce well below the 1.69 million bpd budget target for 2023.
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