Nigeria Vows Full Compliance With OPEC+ Output Cuts by Mid-July

(Bloomberg) -- Nigeria will implement all of the oil-production cuts agreed with the OPEC+ coalition by mid-July at the latest, the head of its state oil company said.

The latest agreement by the 23-nation alliance, struck over the weekend, hinged on promises from the African producer and others to make up for their past disregard of output quotas. OPEC+, led by Saudi Arabia and Russia, is cutting about 10% of global oil supplies to offset the demand hit from coronavirus.

“Definitely by the end of June, we’ll see full compliance from Nigeria,” Mele Kyari, group managing director of Nigerian National Petroleum Corp., or NNPC, said in a Bloomberg television interview when asked when the full package of curbs will be implemented. It will be done in the first half of July “in the worst case scenario,” he said.

Over the past 10 days the country has been cutting more than required under the OPEC+ pact, Kyari said.

Oil Minister Timipre Sylva said in an Instagram post earlier this month that Nigeria was pumping 1.412 million barrels a day, exactly in line with its OPEC+ target. It implemented only 52% of the designated reduction last month, when it pumped 1.613 million barrels a day he said.

That would roughly require the country to curb production by an extra 67,000 barrels a day for three months to offset its earlier deviation, according to Bloomberg calculations.

International oil prices have rebounded to about $40 a barrel in London, more than double the low reached in late April, as OPEC+ reins in supply and fuel demand recovers. The coalition’s accord will support crude at about $42 to $45 a barrel by the end of the year, Kyari said.

The discount on Nigerian crude versus Brent, the international reference price, will probably disappear by the end of July, he added.

Yet the market’s journey back to pre-crisis conditions will be slow. Global oil demand probably won’t reach levels seen before the pandemic until the third quarter of 2021, he predicted.

While some of Nigeria’s assets can produce with oil prices below $30 a barrel, the country is insisting that partners and suppliers cut costs “by at least 30% to 40%” to ensure projects remain in their “comfort zone,” he said.

©2020 Bloomberg L.P.