Bad news for Nigeria as Saudi, Russia agree to freeze oil output

Crude oil prices have been on the rise in the past 24 hours, settling at $34 on Tuesday.

This rise followed an agreement between Saudi Arabia, Russia, Qatar and Venezuela to freeze output at January 2016 levels, and speak with Iran to cut expected increase in output to tackle global oversupply.

Oil prices initially rose to $35.55 per barrel as the news of the “secret” meeting hit the airwaves, but settled at $34 as expectations for an immediate deal did not materialise.

The rise in prices may not be good news for Nigeria, as the country may be forced to under-produce and renege on its 2016 targets.

The 2016 Budget sets an optimistic oil production target of 2.2 million barrels per day, but its January production, according to the Organisation of Petroleum Exporting Countries (OPEC), was 1.9 million.

In an interview on Sunday, Ibe Kachikwu, Nigeria’s minister of state for petroleum resources, said Nigeria was looking at raising its production levels to 2.5 million barrels per day – a feat that may be impossible following these new revelations.

For Nigeria to meet its budget expectations, it must produce 2.2 million barrels per day, and sell at a $38 per barrel.

Speaking at a news conference in Doha, Qatar, Ali Al-Naimi, Saudi Arabian oil minister, said freezing oil producers’ output will be adequate to improve the oil market.

“Freezing now at the January level is adequate for the market, we believe. We recognise today the supply is going down because of current prices. We also recognise that demand is on the rise,” he said.

“The reason we agree to a potential freeze of production is simply, it is the beginning of a process which we will assess in the next few months and decide if we need other steps to stabilise and improve the market.

“This is very important, we don’t want significant gyrations in prices, we want to meet demand. We want a stable oil price.”

Eulogio Del Pino Venezuela’s oil minister said more talks would take place with Iran and Iraq on Wednesday, to get other producers on board.