Africa’s biggest oil producer, Nigeria, has been unable to find ways to cut oil production, as part of the OPEC+ deal signed weeks ago. This has led to the postponement of the crude oil export plan for May and June 2020 by Nigeria National Petroleum Corporation (NNPC), as reported by Reuters.
The new OPEC+ oil production cut deal, to drop a total of about 10 million barrels per day from the oil market, comes into effect from May 1, 2020.
“Nigeria will be producing 1.412 million barrels per day in May-June 2020, 1.495 million barrels per day in July-December 2020, and 1.579 million barrels per day between January 2021 and April 2022, as part of the OPEC+ agreement,” Nigeria’s Ministry of Petroleum Resources said after the OPEC+ deal was agreed on April 12, 2020.
Nigeria produced about 1.853 million barrels per day of crude oil in March, up by 65,000 barrels per day compared to February.
Since NNPC, controls many of the oilfields in Nigeria, in joint ventures with oil multinationals like Chevron, Eni, Exxon Mobil and, Shell, the corporation has been negotiating oil production cuts with these oil majors.
This is the rationale for why the crude oil loading plan for June and the official selling prices for May have been postponed, a trading source told Reuters.
Nigeria’s crown jewel, Bonny Light crude grade, has recently been selling at a discount of $5 a barrel to dated Brent crude oil, while it would have gained a premium of $3 per barrel over Brent crude oil if market circumstances were at normal levels.
There are April and May cargoes of Nigerian crude not being sold, since oil demand has fallen so much that no one wants crude oil even at $15 a barrel or lower.
Under these conditions, Nigeria and the oil majors operating within its shores have no other choice but to reduce their oil production.