Minister of State for Petroleum Resources, Dr. Emmanuel Ibe Kachikwu has revealed that despite the rise in crude price due to the production cut announced by the Organisation of Petroleum Exporting Countries (OPEC) Nigeria should be worried about the United States not flooding the market with its shale oil.
The Minister made the statement on Monday while commenting on OPEC’s production cut.
He said; “Apart from the OPEC cut, I am worried that when we make a cut and get the normal price, there is the possibility of shale production limping up again. So how do we converge everyone producing oil? I believe that until we get Russia, US producers and some understanding with the consumers, we might not get a solution.”
On November 30, OPEC finally agreed to reduce output by 1.2 million barrels a day.
Immediately, benchmark Brent crude prices climb to top $50 a barrel.
However, Kachikwu said Nigeria may not benefit from the deal except the commodity’s prices rises above $54 per barrel.
The minister said the healthy price of crude for Nigeria would be in the mid-$50s “As for Nigeria, a healthy oil price would be mid-50s: 54, 55, 56; I mean, if we have a Santa Claus day, then 60. But frankly, looking more to mid-50s,” he said.
OPEC’s cut by 1.2 million barrels a day brings its production to 32.5 million a day.
After weeks of often tense negotiations, OPEC three biggest producers- Saudi Arabia, Iraq and Iran resolved differences over sharing the burden of cuts.
The agreement is also likely to include an additional reduction of about 600,000 barrels a day by non-OPEC countries.
“This should be a wake-up call for skeptics who have argued the death of OPEC,” said Amrita Sen, chief oil analyst at Energy Aspects Ltd. “The group wants to push inventories down.”
The deal promises to revive struggling economies of countries from Nigeria, Venezuela to Libya and restore flagging confidence in the producer bloc that controls 40 percent of the world’s oil.
However, according to Bloomberg, the consequences will reverberate far beyond OPEC, giving a boost to U.S. shale drillers crippled by a two-year price rout and oil giants such as Royal Dutch Shell Plc, which have cut spending to the bone to weather the prolonged downturn.
Morgan Stanley said Monday that an OPEC agreement could boost crude prices by $5 or more. While the deal is unlikely to be enough to wipe out the crude glut entirely — OPEC’s own estimates show it needs to pump just 31.9 million barrels a day from January to June to balance supply and demand — it clears the way for participation by non-OPEC suppliers, chiefly Russia.


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