Nigeria Hesitant on OPEC Cutback Extension - But IEA Suggests More Months May Have Minimal Impact Anyway

Thursday September 14, 2017

To what degree the Organization of the Petroleum Exporting Countries (OPEC) will positively impact the global crude market in the wake of reports suggesting a rebalance may finally be underway was again the topic of analytical debate on Wednesday, with one prominent expert conceding that unless the cartel deepens its cuts or other factors come into play, stockpiles will not significantly shrink.

The effectiveness of OPEC's output reduction initiative also seems to be threatened by Nigeria, which on Wednesday indicated that there could be a delay before it joins the cartel's objective to bring about a proper supply and demand balance.

Neil Atkinson, head of the oil industry and markets division at the International Energy Agency, said OPEC's rebalancing efforts "have been happening gradually and slowly, perhaps a little more slowly than they would have liked, perhaps a little more slowly than most people  expected.

"But it is happening."

But after being prodded by a Bloomberg reporter, he added with regards to 2018 estimates, "If OPEC were, as a scenario and not a forecast, to maintain its current level of production throughout the rest of 2017 and indeed through `18, then .

"But that will change; it's not going to be that picture necessarily." 

Atkinson reiterated that demand growth is being revised upwards, indicating that there might be more upside to demand.

As the IEA chief was making his comments, Emmanuel Ibe Kachikwu, oil minister for Nigeria, said his country is very unlikely to join OPEC's cuts before next March - which is the current expiry date for the cartel's initiative.

He also told reporters, "I will not be surprised if an extension to the cuts is contemplated post-March, given the sort of volumes I'm still seeing, because as long as the volumes are still a challenge we will continue to do everything that we need to do to tighten up the market."

Wednesday also saw an attempt to support OPEC from cutback cheaters Iran: Bijan Zanganeh, oil minister to the Islamic republic, said the cartel's cutback compliance rate has been about 98 percent in the past eight months and would improve in the future.

He added, "We are prepared for any action that will help the stability of the oil market."

It's unclear to what degree such statements influence traders, but Zanganeh's promise follows a statement made earlier this week by Nicolas Maduro, president of Venezuela, who told reporters without offering any specifics that with regards to OPEC, "We are progressing in agreements on recovering the governance of oil markets and...restoring oil prices."