By Adedapo Adesanya
A prominent member of the Organisation of the Petroleum Exporting Countries (OPEC), Saudi Arabia, has warned fellow crude producers that prices could slump to $50 per barrel, a move that would jeopardise Nigeria’s revenue.
Saudi Energy Minister, Mr Abdulaziz bin Salman, gave a stern warning to fellow OPEC+ ministers, saying this price decline may happen if other producers continue to flout their output quotas in the agreement, according to The Wall Street Journal on Wednesday, citing OPEC delegates who attended a conference call last week.
Nigeria which has a target of 1.5 million barrels per day has not been able to meet its quota, wavering around 1.3 million barrels per day in the last year, caused by infrastructural challenges and oil theft.
If prices go to the $50 mark as warned, it would spell doom for Nigeria, which benchmarked its crude oil price for the year at $77.96 per barrel in the 2024 appropriation act. Oil accounts for more than half of Nigeria’s earnings.
According to the American newspaper, the warning was interpreted by other producers as a veiled threat that Saudi Arabia is fed up with quota cheaters and could go for a price war to defend its market share.
The message from the Saudi minister was that “there is no point in adding more barrels if there isn’t room for them in the market,” a delegate who attended last week’s call told the Journal.
“Some better shut up and respect their commitments toward OPEC+,” was the message from OPEC’s top producer and leader, Saudi Arabia, according to the source.
Apart from its share of the OPEC+ cuts announced a year ago, Saudi Arabia is also voluntarily keeping another 1 million barrels per day off the market.
However, Iraq and Kazakhstan, on the other hand, have been major overproducers and have not kept their end of the deal.
It was reported recently that Saudi Arabia is prepared to bear temporary setbacks in oil prices and revenue because it is reversing course, regaining market share, and abandoning its unofficial $100 oil price aim.
Oil prices have remained low due to persistent overproduction by some OPEC+ producers, as the market believes there is plenty of supply from both OPEC+ and non-OPEC+ sources to satisfy the weak demand.
During last week’s call, Prince Abdulaziz bin Salman reportedly singled out these two producers – OPEC’s second-largest producer Iraq, and non-OPEC producer Kazakhstan.
The Kingdom and Russia fought for market share in the early months of the pandemic in 2020 as a result of declining demand, which was the last time Saudi Arabia engaged in a pricing war.
Dipo Olowookere