Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, has declared that Nigeria would resume supplies of Forcados grade next month, with an “ideal” price of $60 per barrel.
The minister, who said this in an interview on Bloomberg TV yesterday, added that force majeure on Brass River oil terminal, in place since May, had been lifted, a claim that was punctured by its operator, Eni SpA. Eni, according to Bloomberg, added that the force majeure clause, which allows it to miss contractual deliveries due to events beyond its control, remained in place.
Kachikwu maintained that oil prices at $60 a barrel would be “ideal” for OPEC as higher levels risk, spark ing a recovery in competing supplies from the U.S.
The minister stated that the “urgency” felt by the Organisation of Petroleum Exporting Countries (OPEC) and its partners to end the oil rout will ensure they adhere to their December 10 agreement to cut supplies.
The accord should push prices – at about $56 today – a bit higher, yet not enough to trigger a comeback in U.S. shale, according to the minister. “Sixty I think would be ideal,” he said.
“Once you begin to trend past the mid- $60, you’re going to have a surfeit of shale producers jump back into the market. Technology is improving with shale every day, and so the cost of production is continuing to drop.”
Nigeria, along with Libya, was exempted from any obligation to cut as both countries continue to suffer production losses from militant attacks and political instability.
The deal will be in place for six months, and may be renewed if necessary. “Nigeria is working to revive production and expects that, once at full capacity, it may be required to lower output by 50,000 barrels a day if OPEC extends the agreement, Kachikwu said.
The country aims to pump 1.8 million to 1.9 million barrels of crude a day by the end of January, up from 1.6 million a day last month, he said. Nigeria produces a further 300,000 barrels a day of light oil known as condensate.
“Within the past two weeks, Nigeria’s Brass River oil terminal lifted a “force majeure” clause, in place since May, and the country expects to resume supplies of its Forcados grade in late January or early February, Kachikwu said.
Meanwhile, oil prices shot up over four per cent to their highest level since 2015 early on Monday after OPEC and other producers, over the weekend in Vienna, reached first output cut deal since 2001.
They jointly reduced output in order to rein in oversupply and prop up the market. Brent sweet crude futures, the international benchmark for oil prices, soared to $57.89 per barrel in overnight trading between Sunday and Monday, its highest level since July 2015.
U.S. West Texas Intermediate (WTI) crude futures also hit a July 2015 high of 54.51 dollars a barrel. OPEC has said it will slash output by 1.2 million barrels per day from January 1, with top exporter, Saudi Arabia, cutting around 486,000 bpd in a bid to end overproduction. Oversupply has dogged markets for over two years and pushed the economies of many oil-exporting countries into crisis.
On Saturday, producers from outside the 13-country OPEC group agreed to reduce output by 558,000 bpd, short of the initial target of 600,000 bpd.