Nigeria would be one of the greatest beneficiaries should Saudi Arabia go-ahead to extend current OPEC+ production cuts over May and June and also keep cutting 1 million bpd in oil output unilaterally.
This would be a big boost in terms of crude oil revenue earnings for a country that is solely dependent on crude oil for its foreign exchange earnings.
The country budget was based on $40 per barrel of crude oil, the price of crude oil has well gone past $60 per barrel in the last few weeks because of the voluntary decision of Saudi Arabia to cut her production by one million barrels per day.
Despite this gain by Nigeria, it would however have to spend a a large chunk of the excess crude revenue on importing fuel into the country at a very high cost.
Nigeria pumped 1.43 million b/d in December, below its 1.495 million b/d quota, according to S&P Global Platts OPEC+ survey. December production was 70,000 b/d down from November and its lowest level since August 2016.
It was Nigeria’s highest-ever compliance since the OPEC+ alliance began its output deal in 2017, according to the survey.
This was mainly due to production issues caused by a fire at the Qua Iboe terminal, from which one of Nigeria’s main crude grades is exported.
OPEC+ hasn’t significantly eased oil production since January when the collective output was increased by 500,000 bpd from 7.7 million bpd in December to 7.2 million bpd. Considering the still weak global demand, OPEC+ decided in January to give Russia and Kazakhstan small increases for February and March, keeping overall production little changed.
Since then, the cartel has remained cautious with any production changes as exempt OPEC members Libya and Iran kept increasing their production rates while the pandemic situation in some key markets remained more dynamic than oil producers would have liked.
With some European countries tightening movement restrictions further amid yet another spike in infections and the United States also reporting higher new infection rates despite accelerating vaccinations, uncertainty about when oil demand will rebound has heightened. This is likely the primary factor determining Saudi Arabia’s reported willingness to keep cutting at the present rate.