Oil prices rise above $58.17pb as OPEC, non-OPEC members commit to output cut

Oil prices rose to over $58.17 per barrel yesterday in the international market following commitment to output cut by members of the Organisation of Petroleum Exporting Countries, OPEC, and non-members.

Specifically, the price of Brent rose to $58.17 per barrel, recording over $2 in excess of $56 recorded the previous day.

However, Nigeria’s Bonny Light also rose to $56.95 up from $55.44 per barrel recorded on Tuesday this week, indicating an excess of $16.95 over the $40 per benchmark price of the nation’s 2021 budget, which was also based on 1.8 per barrel oil output, including condensate.

Nevertheless, OPEC has cautioned that it does not envisage a rapid oil price recovery in 2021, stressing that slow recovery might be possible from June this year, based on the ability of stakeholders to tackle the Coronivarus pandemic and other challenges, currently impacting the market.

Commenting on the Declaration of Cooperation (DoC), initiated by OPEC and non-OPEC members, at the S&P Global Platts Americas Petroleum and Energy Conference, Mohammad Sanusi Barkindo, OPEC Secretary-General, said: “Over the subsequent three years, from 2017-2019, the diligent, and coordinated response through voluntary production adjustment decisions taken by the DoC helped rebalance the market, restore stability and revive the industry.

“When the year turned from 2019 to 2020, there was a great deal of optimism for the oil market in the coming 12 months, not only for the oil market but the global economy too.”

According to him, “By March, however, the COVID-19 pandemic had pervaded almost every aspect of our daily lives, with widespread lockdowns, economies in major distress, and many businesses shuttered in. In terms of the oil and gas industry, every producer was impacted. No one was immune.

“The DoC had to again stand up and be counted. The action was needed, and activities we did with the largest and longest production adjustments in the history of the OPEC, the DoC, and the oil industry agreed on 12 April 2020 to help counter the massive oil demand decline that at times was above 20 mb/d in April. The phased reductions in the adjustment levels over a two-year period demonstrated the full commitment of all participants to a common goal.”

Expressing optimism for 2021, he stated: “Nonetheless, we are cautiously optimistic for the global economic rebound in 2021, and for significant oil demand growth. But we will continue to take a month-by-month approach to assess market conditions, and stand ready to take any necessary actions through the DoC. In looking further ahead, oil market stability, and more broadly, energy market stability, will be vital to the energy transition.”