From Uche Usim, Abuja
Minister of State, Petroleum Resources, Mr Timipre Sylva, on Tuesday explained that the decision of Organisation of Petroleum Exporting Countries Plus (OPEC+) during its meeting on October 5, 2022 to voluntarily adjust crude oil production downwards by two million barrels per day was unanimously taken for the exclusive purpose of ensuring the long-term stability of the oil market.
OPEC+ is a loosely affiliated entity consisting of the 13 OPEC members and 10 of the world’s major non-OPEC oil-exporting nations. OPEC+ aims to regulate the supply of oil to set the price on the world market.
According to the Minister, the decision also sought to balance supply and demand, and forestall a degeneration of the current volatile oil market to a situation where larger production cuts will be required to balance it.
“This proactive decision was based on a thorough assessment of market conditions as OPEC+ has always been guided”, Sylva stated.
OPEC+ agreed its deepest cuts to oil production since the 2020 COVID-19 pandemic at a Vienna meeting last Wednesday, curbing supply in an already tight market despite pressure from the United States and others to pump more.
The cut could spur a recovery in oil prices that have dropped to about $90 from $120 three months ago on fears of a global economic recession, rising U.S. interest rates and a stronger dollar.
Sources said the United States had pushed OPEC not to proceed with the cuts, arguing that fundamentals do not support them.
Oil producing nations stand to benefit from the production cut that seeks to raise oil price to around $120/barrel.