By Ishaya Ibrahim
When oil ministers of OPEC meet on June 22 in Vienna, they will be confronted with the proposal by Russia, a non-member of the organisation, to either accept an increase of 1.5 million-barrel-a-day to the global oil production or refuse it.
The hike in production suits Saudi Arabia, an OPEC member.
And like Russia, it has the capacity to absorb new production quota. So, Saudi Arabia may likely prevail on members of OPEC, particularly its Gulf allies to push for increase production.
A global hike in production output may set oil price in downward slope beyond even Nigeria’s oil budget benchmark of $50.5. On June 20, the oil price was $74.5. Oil price had earlier reached $80 per barrel in May, the highest since 2014.
Countries that are opposed to production increase include Nigeria, Venezuela, Iran, Iraq, and others with doubtful capacities to meet even their current production quota.
Nigeria’s budget for 2018 is pegged at 2.3 million barrels-per-day. But inadequacies in production capacities has inhibited it from reaching that number.
May 2018 production data reveals that crude oil production was 2.11 million barrels-per-day, a shortfall of 190,000 barrels-per-day.
Saudi Arabia is the leading proponent for increased oil production, a move which analysts say is targeted at hurting Iran’s economy, its regional rival. Iran is already under a US sanction. One of the sanctions banned companies that do business with Iran from having dealings with the US. The move is aimed at crippling investments in Iran’s oil industry.
“The most important thing is the consumers,” Saudi Energy Minister Khalid Al-Falih said while trying to justify his country’s position for an increased output.
“We’re not going to allow a shortage to materialize to the point that markets will be squeezed and consumers will be hurt.”
Bloomberg reports that if the Saudi position prevails, it would allow OPEC and its allies to partially offset the impact of the collapse in Venezuela’s oil industry and feed fast-growing demand — two factors that played a big part in Brent crude’s surge to above $80 last month.
Nigeria’s budget is already faced with a deficit of N1.950 trillion. A slide below the benchmark oil price could trigger another economic crisis that led to the recession in 2016.
