The slump in the U.S. crude oil futures below $0 per barrel is not a reflection of the reality in the global oil market capable of impacting Nigeria’s oil production, the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mele Kyari, has said.
Last Monday, the U.S. crude oil price dropped to its worst level since New York Mercantile Exchange (NYMEX) opened oil futures trading in 1983.
The drop, coming few days after Nigeria’s benchmark crude oil grade, Bonny Light, slumped to an average $12-$13 per barrel, heightened apprehension about Nigeria abandoning oil production amid declining prices.
Despite the recent intervention by the Organization of Petroleum Exporting Countries (OPEC) and its allies, led by Russian, to cut global crude oil, no significant improvement has emerged in the oil market.
With crude oil prices on a downward swing, market analysts say the record output cuts by OPEC+ expected to take effect from May 1 needs some time to rebalance the market.
No cause for apprehension
But, the GMD of NNPC who spoke with PREMIUM TIMES on Tuesday said Nigeria has no cause to be apprehensive over the current situation as the US $0 price has no capacity to impact Nigeria’s oil production.
“That is not real crude oil price. That is the traders’ paper figure just showing the detail at the close of their business for the month. You would have observed that it has changed this morning (Tuesday). This is because they are not sure of the storage facilities for their stock of products they have,” the NNPC boss said.
He said the situation, which reflects the current position in the U.S market, does not have any direct impact on the price of the Brent crude oil blend, which rose to about $28 per barrel before dropping to the current price of to $26.24 a barrel on Tuesday.
“Usually, the spread between OPEC price and the other prices vary by about $8 to $9. When that is deducted from the prevailing price, we have the real price in the market. But, today, Brent is about $28 per barrel. If $8 or $9 is deducted, we will know what the real price is today.
“But, it’s really nothing for us (Nigeria) to worry about at all. Like I said the other day, the market will still change and rebound after the OPEC output cut. We will have to wait and see what is going to happen. It is just the close of the market month,” he said.
On whether the current situation has any impact on Nigeria’s oil production, he said that is a different issue, pointing out that oil production is usually a factor of the availability of the market for the product.
He said now that there is a drastic drop in the price of crude oil at the internal oil market, there is the problem of storage facilities, which is why traders have taken that position to show inactivity.
However, as soon as most countries return to the market by May after the lockdown period, as a result of the impact of the Coronavirus on the global economy, Mr Kyari said storage facilities would become available, and of course, crude oil price will rebound.
Nigeria has not shut-in oil production
He debunked reports that Nigeria has shut in its oil production as a result of the current situation, adding that the recent decision of the OPEC+ on output cut would take effect in May and June.
At its last meeting a fortnight ago, OPEC and its allies agreed to cut a total of about ten million barrels of crude oil per day, with about eight million barrels per day in the first phase of the implementation of the deal.
The NNPC Chief said Nigeria achieved the highest oil production capacity it has not in the last two to three days, with the country approaching about 2.44 million barrels per day.
Nevertheless, he said the country has to scale down the production, considering that ultimately it has no way to take the oil to during this period of coronavirus pandemic.
“We have to cut down, whether with or without OPEC output cut deal. We have to reduce our oil production level because we do not have where to take the oil to, till the situation improves. The impact of the crisis is global and not on Nigeria alone,” he said.