Africa’s largest oil producer, OPEC member Nigeria, has yet to figure out how and from where to cut production as part of the OPEC+ deal, and this has led to a delay in the May and June crude oil export plans of Nigeria National Petroleum Corporation (NNPC), trading sources told Reuters on Monday.
The new OPEC+ production cut deal to remove a total of 9.7 million bpd from the market in May and June enters into force on May 1.
Nigeria will be producing 1.412 million bpd in May-June 2020, 1.495 million bpd in July-December 2020, and 1.579 million bpd between January 2021 and April 2022, as part of the OPEC+ agreement, Nigeria’s Ministry of Petroleum Resources said in a statement after OPEC+ sealed the deal on April 12.
This is in addition to condensate production of 360,000 bpd to 460,000 bpd from which Nigeria is exempt from the cuts, the ministry noted.
According to OPEC’s secondary sources in its official production figures for March 2020, Nigeria pumped 1.853 million bpd of crude oil in March, up by 65,000 bpd compared to February.
Since NNPC operates many of the oilfields in Nigeria in joint ventures with international oil majors, including Exxon, Chevron, Shell, and Eni, the Nigerian state oil firm is still negotiating the cuts with oil majors. This is the reason why the crude oil loading program for June and the official selling prices (OSPs) for May have been delayed, a trading source told Reuters.
According to other trading sources who spoke to Reuters, Nigeria’s flagship Bonny Light crude grade has been recently offered at a discount of $5 a barrel to dated Brent, while it would have fetched a premium of $3 a barrel over Brent if market conditions were normal.
There are April and May cargoes of Nigerian oil that have not been sold yet, other sources say—a sign that demand is so depressed that no one wants even oil at $15 a barrel or less.
In these circumstances, Nigeria has no other choice but to cut its production.
“We have to cut down, whether with or without OPEC output cut deal. We have to reduce our oil production level because we do not have where to take the oil to, till the situation improves. The impact of the crisis is global and not on Nigeria alone,” Mele Kyari, Group Managing Director at NNPC, told Nigeria’s Premium Times last week.