Page 4 - AfrOil Week 15 2020

AfrOil COMMENTARY AfrOil
OPEC members Algeria and Nigeria will cut production by more than 650,000 bpd in May and June (Photo: File)
Nigeria, Algeria, South Sudan
endorse new OPEC+ output deal
All three oil-producing states have agreed to trim output in order to help rebalance markets
WHAT:
Abuja, Algiers and Juba have all pledged to cut production.
WHY:
These African oil produc- ers are keen to mitigate the damage wrought by falling crude prices.
WHAT NEXT:
If the pandemic keeps global energy demand down, the new agreement may not be enough – and African producers may not have much of an incentive to comply.
OIL-PRODUCING states in Africa have suf- fered serious economic setbacks over the last month.
On the one hand, they have seen demand for their production evaporate as a result of the coronavirus (COVID-19) pandemic, which is cutting into global energy consumption. On the other hand, they have seen the value of the bar- rels they do manage to sell plummet as a result of the price war that broke out between Saudi Arabia and Russia.
They have more reason for optimism this week, though. This is not because of any positive developments on the demand side, as the global public health crisis is still keeping energy con- sumption levels down. Instead, conditions may be improving on the supply side.
Oil prices began plummeting in early March after Russia refused to accept Saudi Arabia’s request to work with OPEC to cut production by 1.5mn barrels per day (bpd). This refusal
effectively ended the three-year-old OPEC+ agreement, which was already keeping another 2.1mn bpd off the market. It also led Russia and Saudi Arabia (and later, other producers such as Nigeria) to increase crude output levels. This, in turn, exacerbated widespread supply gluts and made the situation even worse.
But as reported elsewhere in this issue of AfrOil, Russia and Saudi Arabia have ended
their quarrel – or have, at least, patched over
their differences enough to hammer out a new OPEC+ deal that will reduce global output by 9.7mn bpd in May and June, dropping to 8mn
bpd in the second half of the year and again to
6mn bpd between January 2021 and April 2022.
This essay will examine three African countries’ contributions to this accord, which was ham- mered out on April 12 during an extraordinary OPEC meeting that was held by video con- ference in compliance with social-distancing guidelines. 
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w w w . N E W S B A S E . c o m Week 15 15•April•2020