Nigeria and Iraq fight back Against an Increase in OPEC output, As oil prices rise toward $100

By Derrick Bangura.

Nigeria and Iraq have claimed that the Organization of Petroleum Exporting Countries (OPEC) and its partners, OPEC+, plan of gradually increasing oil output is sufficient to bring the market back into equilibrium.

Despite crude oil rising to around $100 a barrel this year, both countries insisted that OPEC should not be more aggressive.
The 23-nation alliance, led by Saudi Arabia and Russia, will meet on March 2 to decide on the next course of action on the amount of oil that members are anticipated to pump in April.

Nigeria’s Minister of State for Petroleum Resources, Timipre Sylva, was quoted by Bloomberg as saying that the international cartel would not need to bring any unexpected barrels to the market and that the current plan properly satisfies the market as it is.

“We won’t do anything remarkable at this time since we are anticipating a lot of output from outside of OPEC+,” Sylva told reporters at an event in Doha, Qatar, according to Bloomberg.
He added, “There’s no need at all to bring on more barrels than the current plan. We are expecting more production if a nuclear deal with Iran works out (since) there will be production from them.”

Several of OPEC+’s biggest producers want to continue to add 400,000 barrels a day of crude to the market each month, Bloomberg reported.

In addition, Iraq’s Ihsan Jabbar said OPEC and its partners would make their decision for April at the March meeting, after reviewing fresh data on supply and demand.

The comments came even as Brent crude rose 2.3 per cent to $97.60 a barrel, extending this year’s jump to 26 per cent.

Tuesday’s gain occurred after Russian President Vladimir Putin announced he was recognising two self-proclaimed separatist republics in Ukraine.

Iraq’s energy minister, Jabbar, said OPEC was factoring in growth in output from non-OPEC+ members, such as Brazil and Canada, and did not want to see any increase in commercially-stored oil around the world.
“The market will have more and more oil so we think there’s no need” to deviate from today’s strategy, Jabbar said in an interview in Qatar, where he was attending a natural gas conference, together with Sylva and others.

“We will not create any growth to the commercial storage. We will secure all the demand by making the required supply,” he added.

Russia, a major oil and gas producer, plans to send “peacekeeping forces” to the Ukrainian region in a dramatic escalation of the on-going conflict. Moscow has consistently denied having plans to invade Ukraine.

Some major oil importers have called on OPEC+ to pump faster and put pressure on the likes of Saudi Arabia to use up some of their spare capacity.

Jabbar said it would be “unfair” for any OPEC+ state to raise output beyond its quota, despite many members struggling to reach theirs.

Nigeria has been struggling to meet its OPEC allocation for months and has as much as 300,000 barrels per day deficit, mainly due to ageing upstream infrastructure and sabotage as well as technical reasons.

Despite the over 1.7 million barrels’ output allowed by the organisation, the country has managed to increase production to about 1.4 million, going by the latest OPEC review.

Although there are issues surrounding the sustainability of the current upward trend of the country’s supply to the global market, it is seen as a good sign for the nation’s oil and gas industry.

Last week, the International Agency Energy Agency (IEA), which advises rich countries, said OPEC+ was pumping almost one million barrels a day below its target.

“We have come from the recovery from COVID,” the Iraqi minister said.

“It is not fair that you will give the increase just for some countries,” he added.

Iraq undershot its output target last month because of bad weather at ports, Jabbar said. The country should meet its quota for February of around 4.3 million barrels a day, he noted.

Meanwhile, the Chief Executive of Vitol, one of the world’s biggest oil traders, expects oil prices to climb to $100 and remain at that level for an extended period of time.

This bullish prediction, he said, was driven by a belief that global demand would surge in the second half of the year and could surpass 100 million barrels per day.

On the supply side, he said it was the fear of shrinking spare production capacity and restraint from US shale that was driving oil prices higher. Oil prices will go higher, and they would stay there for an extended period of time, said the chief executive of Vitol, Russell Hardy.

“The 100 million-barrel number is probably going to be exceeded this year,” Hardy told Bloomberg, adding, “Demand is going to surge in the second half.”

According to him, demand for crude this year could surpass 100 million barrels daily.
Vitol’s CEO, like many others, highlighted that the global oil market imbalance was fueling inflation and threatening to stymie the world economy’s recovery from the pandemic’s aftermath.

More oil, on the other hand, does not appear to be on the way, as US and European supermajors focus on shareholder returns rather than production expansion, while OPEC+ countries’ national oil corporations stick to their original target of adding 400,000 bpd to total production every month.

“At some point, we’ll run out of spare capacity.” That’s what the market is attempting to figure out, according to Hardy.
Goldman Sachs, Bank of America, JP Morgan, and Morgan Stanley, among others, have recently predicted that oil prices will approach $100 per barrel.