09/22/2021 | News release | Distributed by Public on 09/22/2021 08:57
Opec+ ministers should "absolutely" endorse a further 400,000 b/d increase in crude output when they meet early next month to decide on November quotas, according to the managing director of Nigeria's state-owned oil company NNPC Mele Kyari.
Kyari sees the global oil market as undersupplied at the moment and in need of additional volumes from Opec+ members. "I think we probably have a supply crisis now," Kyari told Argus in an interview in Dubai, where he is attending the Gastech conference. "You see the [demand] numbers are near pre-Covid levels now, and with all the actions we took to see how we could curtail [the spread of] the pandemic, getting back to those numbers was a huge challenge."
Even with additional Opec+ output, Kyari expects supply to remain tight and keep oil prices steady or possibly push them higher. "What I see… is probably another $5-10/bl," he said.
Kyari's view on Opec+ policy is largely in line with the view of fellow Opec member UAE, whose energy minister Suhail al-Mazrouei also thinks the group should sanction a November production hike when they next meet. "If things move as they are… I don't see any reason why we should not continue with the plan," al-Mazruoei told reporters at Gastech yesterday.
Opec+ agreed on a roadmap in July to gradually raise its collective output quota by 400,000 b/d every month from August to April next year, and then by 432,000 b/d from May onwards until the group has fully unwound the cuts it implemented last year in response to the Covid-induced slump in demand. But the output hikes need to be confirmed at monthly ministerial meetings, and they can be paused for up to three months if market fundamentals warrant it.
Nigeria, which has been lobbying for an increase in its Opec+ baseline, has been battling a spate of infrastructural and operational problems that have limited its crude production recently. Argus estimates the country's output fell to a seven-month low of 1.34mn b/d in August, some 260,000 b/d short of its 1.596mn b/d Opec+ quota for the month.
"When you shut down the reservoirs, they don't always come back the way you want and you normally need some intervention or some activities to get them back," Kyari said. "That's what we are working on now."
Last month's output was also constrained by a leak at a single-buoy mooring point at the Forcados terminal, which helped drive Nigerian exports to a multi-year low of 1.2mn b/d. Shell declared force majeure on Forcados crude loadings on 16 August. But with the issues at the terminal now "fixed" and loadings back to normal, Kyari expects Nigeria to be able to ramp production back up to its 1.61mn b/d September quota "by the end of October, or at the latest, middle of November".
By Nader Itayim