OIL: Nigeria produced above OPEC quota in Feb

Nigeria, Africa’s top oil producer, exempted from the previous production cuts deal pumped more crude oil in February than the quota given by the Organisation of Petroleum Exporting Countries.

OPEC and 10 non-OPEC countries agreed in December to cut oil production by 1.2 million barrels per day effective from January for an initial period of six months to help balance the market and support prices.

Nigeria, which was exempted from the previous production cuts deal, agreed to a quota under the current accord. With a reference level of 1.738 million bpd, the country was given a new quota of 1.685 million bpd.

But Nigeria pumped 1.88 million bpd in February, 190,000 bpd above its cap, S&P Global Platts’ survey of industry officials, analysts and shipping data found.

The country has started production from a new deepwater field, Egina, though the Minister of State for Petroleum Resources, Dr Ibe Kachikwu, has suggested that he might seek to have those barrels classified by OPEC as condensates, which is not subject to the quotas.

Nigeria also considers Agbami grade as a condensate, while S&P Global Platts and some other secondary sources used by OPEC to monitor production classify it as crude.

The nation’s crude oil production including condensates fell to 1.999 million bpd in January from 2.081 million bpd in December, according to the Ministry of Petroleum Resources.

President Muhammadu Buhari said last month that the country could consider a reduction in crude oil production in support of efforts to shore up the price of the commodity.

He said, “As a responsible member of the Organisation of Petroleum Exporting Countries, Nigeria was willing to go along with the Saudi initiative in limiting output so that prices would go up.”

The 2019 budget proposal, presented to the National Assembly on December 19 by President Buhari, was based on oil production of 2.3 million bpd (including condensates), with an oil benchmark price of $60 per barrel.

OPEC’s crude oil production in February modestly declined to 30.80 million bpd in February, the survey showed.

The figure is a 60,000 bpd drop from January and is the group’s lowest output level since March 2015, when Gabon, Equatorial Guinea and Congo had yet to join the organisation but Qatar was still a member.

Despite the fall, OPEC still has more cutting to do to fully comply with its supply accord that went into force in January. The 11 members with quotas under the deal achieved 79 per cent of their committed cuts in February, and remain 170,000 bpd above their collective ceiling. This is a slight improvement on January’s 76 per cent, with Nigeria and Iraq producing far in excess of their cap, according to Platts calculations.

Iraq produced 4.67 million bpd in February, according to the survey, 160,000 bpd above its quota.

The country has consistently lagged in compliance with its committed cap, both under the current deal and under the previous accord, which ran from 2017 to 2018.

Iraqi officials have sought exemptions from the deal, saying their war-torn country needed oil revenues to rebuild from its devastating fight against the Islamic State. But other members have pressured the country -largely to no avail – to conform to its quota.

Libya, which this week lifted the force majeure at its 300,000 bpd Sharara field after almost three months, pumped 870,000 bpd in February, a slight rise from January, according to the survey.

The first cargoes of Sharara crude since production restarted are expected to be lifted this weekend.

Venezuela and Iran, both under US sanctions, and Libya, where instability continues to impact output, are exempt from the deal.

The February output figures will be reviewed by a six-country monitoring committee of the OPEC/non-OPEC coalition, which meets on March 18 in Azerbaijan to discuss market conditions and assess compliance with the deal. The committee is co-chaired by Saudi Arabia and Russia.

Saudi Arabia, OPEC’s largest producer, has made good on its pledge to lead the coalition by example, slashing its output to 10.15 million bpd in February, the survey found. That is 160,000 bpd below its quota of 10.31 million bpd and the kingdom’s lowest output level since May 2018.

Venezuela, whose oil production has been declining for years due to underinvestment, technical problems and labour issues, pumped 1.10 million bpd in February, down 60,000 bpd month-on-month, as it has struggled to sell its crude since US sanctions were imposed in late January.

Iran managed to keep production steady in February, at 2.72 million bpd, the survey found, as several buyers in the month took advantage of sanctions waivers the US granted to eight countries to purchase Iranian crude.