Despite the oil output cut initiative of Organisation of Petroleum Exporting Countries, OPEC, and non-OPEC members (OPEC+), the price of Bonny Light, Nigeria’s premium oil grade, only rose marginally from $23.19 to $23.25 per barrel, yesterday.

Prices of other crudes, including Brent and OPEC Basket also remained low at $32.05 and $21.19 per barrel respectively.

Investigation by journalists  showed that it would take a much longer time for the market to respond to the oil cut as the market was saturated with excess oil from many nations, including Mexico, which has already opted out of the accord.

Moved to tackle the prolonged instability in the market, the 10th (Extraordinary) OPEC and non-OPEC Ministerial Meeting held via video conference, on Sunday, April 12, 2020, had agreed to, “Adjust downwards their overall crude oil production by 9.7 mb/d, starting on 1 May 2020, for an initial period of two months that concludes on 30 June 2020. For the subsequent period of 6 months, from 1 July 2020 to 31 December 2020, the total adjustment agreed will be 7.7 mb/d.”

The Meeting also agreed that this “will be followed by a 5.8 mb/d adjustment for a period of 16 months, from 1 January 2021 to 30 April 2022. The baseline for the calculation of the adjustments is the oil production of October 2018, except for the Kingdom of Saudi Arabia and The Russian Federation, both with the same baseline level of 11.0 mb/d. The agreement will be valid until 30 April 2022; however, the extension of this agreement will be reviewed during December 2021.”

In his response, Secretary General, Mr Mohammad Sanusi Barkindo, had expressed optimism that the market would respond positively to the decision from Monday, April 13, 2020.

He had stated: “It can only be described as an historic meeting, and it built momentum for support at the G20 Extraordinary Energy Ministers Meeting on April 10, with both producers and consumers participating. This was forthcoming in the statement from the G20 meeting with a commitment to work together “in the spirit of solidarity”. It also recognized the commitment of the producers in the OPEC+ group to stabilize energy markets and acknowledged the importance of international cooperation in ensuring the resilience of energy systems.

“Now we need to ensure as a group that we deliver on these expectations. We need to iron out any marginal differences to reach a consensus decision.  We need to get this deal over the line. The consequences of not finding a solution and unanimity today do not bear thinking about.”

Vanguard