In the period between January and May 2023, Nigeria has incurred a loss of $5.6 billion due to the underproduction of its crude oil quota, priced at $70 per barrel. A recent survey revealed that while OPEC’s crude oil output experienced a slight decline in June, Nigeria’s rising production levels limited the impact of cutbacks by other member countries, including Iraq. However, Nigeria has consistently failed to meet its OPEC production allocation for over 30 months.
The survey did not provide the specific volume of Nigeria’s crude oil production in June, as the data for that month is yet to be released by OPEC and Nigeria’s upstream regulator. Despite a slow growth in crude oil production since the last quarter of 2022, with the exception of a dip in April 2023 to approximately 1 million barrels per day, Nigeria’s overall output has been below the expected volume.
In June, OPEC’s total crude oil production reached 28.18 million barrels per day, down by 50,000 barrels per day from the revised figure in May. The survey indicated that Nigeria and Iraq’s increased production levels offset the production cutbacks implemented by other member countries. OPEC’s efforts to limit supply ahead of further voluntary reductions, particularly by Saudi Arabia, have seen little progress. In April, several OPEC+ members pledged additional voluntary cuts on top of the reductions made in late 2022.
Nigeria faced consequences from the Saudi-led OPEC group, which reduced the country’s baseline for 2024 from 1.742 million barrels per day to 1.38 million barrels per day due to consistent failure to meet allocated volumes. Data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) revealed that Nigeria only achieved 56% of its expected production in the first five months of 2023. This resulted in a deficit of 80 million barrels of crude oil not produced during the period, leading to the substantial loss of $5.6 billion in revenue at a conservative oil price of $70 per barrel.
While Nigeria’s production increased marginally, it still falls short of its agreed-upon level under the OPEC+ deal. Gulf producers Saudi Arabia, Kuwait, and the United Arab Emirates demonstrated high compliance with voluntary cuts in June. Saudi Arabia experienced the largest decline in output, reducing it by 40,000 barrels per day. Iran saw the most significant decline among OPEC members, with a drop of 50,000 barrels per day due to lower-than-usual exports in May. Iran, Libya, and Venezuela are exempt from OPEC cuts.
As oil prices exceeded $75 a barrel, concerns over sluggish global economic activity and fuel demand continued. The prices have experienced a fourth consecutive quarterly decline, with benchmark Brent crude futures for September delivery on track for a six percent decrease in the second quarter of 2023. Similarly, the United States West Texas Intermediate crude (WTI) experienced its second consecutive quarterly drop, declining by 6.5 percent.
