Nigeria, Iraq, Blurring Early 2020 Outlook For Oil-Based Economies

Nigeria, Iraq, Blurring Early 2020 Outlook For Oil-Based Economies

Sources close to decision makers in the Organisation of the Petroleum Exporting Countries has said Nigeria and Iraq’s inability to comply with oil production cuts, is making it difficult to predict what the market for the product will be in the first quarter of 2020. 

The sources also informed Reuters that Saudi Arabia and Russia are pushing for the current output restriction of 1.2m barrels daily to be extended from March to June 2020. 

The key reason for the move by the Saudis is the planned listing of state-owned Aramco in December.

“The Saudis want to see how the rest of those who are not complying – Nigeria and Iraq do first. There are no numbers being circulated so far for deeper cuts or changing output quotas,” said the first OPEC source. 

Fortunately for the two defaulters, there are no discussions about deepening cuts just yet.

“So far, we have two main scenarios: either meet in December and extend the current cuts until June or defer the decision until early next year, meet before March to see how the market looks and extend the cuts until the middle of the year,” said an OPEC source. 

The Arabians intend to give the final value of the Aramco share by December 5, which coincides with when the cartel and its Russian-led alliance known as OPEC Plus are expected to have arrived at a decision on whether to deepen present cuts.

“It is more likely that we will extend the agreement in December to send a positive message to the market. 

"The Saudis don’t want oil prices to fall, they want to put a floor under the prices because of the (Aramco) IPO,” the official said. 

OPEC’s General Secretary, Nigeria’s Mohammed Barkindo, had a positive outlook on how Q1 2020 will be.

According to the news agency, Barkindo expects a slowdown in the supply of the United States Shale oil and a potential upside for petroleum demand. 

The International Energy Agency believes OPEC will lose 1m barrels of demand daily in 2020 due to increased production from countries that do not belong to the OPEC Plus coalition.

Whatever the prediction for the market early next year might be, the Saudis want oil prices to go higher or stay within the $60 bracket and Russia is fully backing the US ally.

Nigeria’s medium term expenditure framework for 2020-2022 is predicated on higher oil production. 

The country is desirous of increasing its output to 3m by 2023. 

This implies that the country would be willing to sell its oil at any price and pump as much as it can salvage from sabotage and shut-ins. 

Coupled with its over-production since new cuts came in January, Nigeria has shown that its strategy does not align with that of the cartel but has not like Qatar, decided to pull out.

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SaharaReporters, New York



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Source: Nigeria, Iraq, Blurring Early 2020 Outlook For Oil-Based Economies