There is every indication that the OPEC+ production cut target might be extended a little far into the coming year according to the Russian President, Vladimir Putin. This is even as Nigeria is struggling to meet her current quota target.
Oil prices slid early on Friday and were on track for a flat weekly performance, as new coronavirus cases in Europe and the United States continued to spike, alarming the market that the oil demand recovery will be derailed.
As of 10:25 a.m. EDT on Friday, WTI Crude prices were trading down 1.10 percent on the day, at $40.49. Brent Crude was down 1.14 percent at $42.66.
Nigeria and Iraq are two countries consistently accused of being lagging in the cartels efforts of maintaining a production cut that would improve the price of crude oil at the international market. The implications of this is that Nigeria which is struggling to meet her revenue target of about N13 trillion may be faced with a lot financial challenge.
Nigeria recorded a compliance level of 80 percent with a production cut of 333,000 bpd, leading to a total production of 1.49 mbpd. It has capacity to produce about 1. 8 million mbpd before the COVID19 incident
According to President Vladimir Putin, he said Russia does not rule out the possibility that OPEC+ could extend its current 7.7 million barrels per day of production cuts into next year.
Analysts say comments could be merely jawboning to a market that is desperately seeking reassurances that oil production will not ramp up too quickly beyond demand. But Russia has in the past been reluctant to keep up its end of the oil production cuts, so any mention that it is even thinking about a slower tapering of the cuts is noteworthy.
In fact, Russia had failed to bring its own oil production down to the level it agreed to for most of the period of cuts in 2019 and early 2020.
Russia also was the spark that ignited the oil price war between it and Saudi Arabia-and by default the United States, when it refused to agree to additional cuts using the argument that as OPEC decreases its production, it opens the door for U.S. producers to increase theirs.
Vladimir Putin has had several discussions with Saudi Arabia and the United States on the state of the oil markets. “We believe there is no need to change anything in our agreements,” Putin said. “We will watch how the market is recovery. The consumption is on the rise.”
Putin added, however, that they did not “rule out” the possibility that OPEC+ could keep the current production cuts instead of removing them at the pace it had initially agreed upon.
But Putin didn’t stop there. “If need be, maybe, we can take other decisions on further reductions. But we don’t see such a necessity now,” Putin said, intimating that more cuts were at least possible.
Russia’s willingness to even consider additional cuts or waiting longer to ease the cuts than planned will be viewed positively by the markets, which has been struggling to break out of a rut where oil prices have traded in a relatively tight band for months.