Matilda Omonaiye/
Crude oil gained, on Monday, as news that Nigeria plans to limit its production and Saudi Arabia has pledged to lower crude exports sent prices higher for the first time in three sessions.
Energy ministers from major crude-producing nations gathered in St. Petersburg, Russia, on Monday, as part of a monthly meeting held to monitor compliance with crude production limits set by an agreement led by the Organisation of the Petroleum Exporting Countries that began at the start of the year.
Nigeria committed to taking part in production cuts if it reaches a production level of 1.8 million barrels a day, while Saudi Arabia, which is the world’s largest oil exporter, agreed to limit its exports at 6.6 million barrels a day, according to a report from The Wall Street Journal.
“Saudi Arabia announced its plan to cut exports and this is their way of gluing things back together,” said Bill Baruch, chief market strategist at iiTRADER.
Nigeria’s current production is below that level—at about 1.6 million barrels a day in June.
News reports, meanwhile, indicate that the Saudi export cut would amount to roughly one million barrels a day, compared with a year ago.
Michael Lynch, president of Strategic Energy & Economic Research, said the drop in exports that the Saudis plan for next month would coincide with higher domestic energy demand for cooling, and referred to the Nigeria and Saudi Arabia decisions as “mostly conciliatory.”
Nigeria and Libya have seen their own output rebound faster than expected. The two OPEC members have been exempt from the production-cut deal as their output recovers from years of civil unrest.
OPEC members had agreed to reduce their output by about 1.2 million barrels a day from January 1 of this year through the end of March next year.
But tanker tracker Petro-Logistics on Friday reported that OPEC output is expected to top 33 million barrels a day this month, up 145,000 barrels a day from June, according to Reuters.
“The only significant thing about the meeting is that Nigeria has voluntarily agreed that they will not increase their production above 1.8 million barrels a day once they have achieved that level,” said Naeem Aslam, chief market analyst at ThinkMarkets U.K.
But when it comes to the “compliance side of things”, that’s getting “really ugly”, he said. “A lot of cheating is already happening and we are only half (way) through this agreement.”
Saudi energy minister, Khalid al-Falih, said on Monday, the coalition’s compliance with the production deal was strong, but he also said there were laggards whose issues had to be dealt with “head on,” WSJ noted.
Meanwhile, growth in U.S. oil production, with total output reaching its highest level in two years, has worked to offset some of the impact of the production cuts among OPEC members and its allies.
OPEC secretary-general Mohammad Barkindo, however, recently outlined a rosier picture, saying the rebalancing of oil-market supply and demand is “bound to accelerate in the second half”.
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