There’s hope in sight for the dwindling fortune of Nigeria’s economy as two leading oil-producing countries, Saudi Arabia and Russia have chosen to end the oil war that has affected the global oil markets.
The world’s two largest oil exporters came to a resolution at an expanded Organisation of Petroleum Exporting Countries (OPEC) emergency meeting which was held through a video conference.
In March, members of OPEC agreed to cut crude oil production to a combine volume of 1.5 million barrels per day as part of the approach to reduce the impact of the Coronavirus pandemic on the global oil market, however, Russia rejected the plan saying every country was free to export oil as much as they could when the current deal ended.
Saudi Arabia responded aggressively by increasing its output to 12.3 million barrels a day, more than 25 per cent higher than the previous month’s production, a move Russia also followed.
Since then, Brent crude price has fallen, to as low as $22 per barrel, the lowest in close to two decades, before rising steadily to about $30.
However, both countries have now agreed to slash crude oil output, a move which is expected to boost oil prices.
According to the OPEC statement, Saudi Arabia and Russia will apply reductions to a production baseline of about 11 million barrels a day, For Saudi Arabia, that’s lower than recent output, which rose above 12 million a day in early April.
Bloomberg reports that the oil price war, which started in March after the collapse of previous OPEC+ talks, lasted exactly 31 days, far fewer than similar feuds in 1986, 1998 and 2016. But in that short period, it has forced companies from Big Oil giants to U.S. shale independents to slash spending, fire workers and cancel projects.
Meanwhile, oil-rich countries have gone cap-in-hand to the International Monetary Fund and the World Bank for help, hobbled by low prices.
“For oil markets, the massive oil-demand contraction is unprecedented,” OPEC said in an internal document circulated to ministers and seen by Bloomberg. “The current outlook looks extremely bleak, with oil markets anticipated to be severely tested on many fronts.”
Impact on Nigeria
Nigeria, a mono-economic country has also been a victim of the Russia-Saudi oil war as its crude oil benchmark, initially pegged at $57 per barrel had to be reduced to $30 while crude oil production remains at 2.18 million barrels per day as earlier contained in the budget estimates.
This also forced the country to slashed its 2020 budget by over N320 billion and proposed a new budget of N10.27 trillion against the N10.59 trillion passed by the national assembly.
