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In the latest sign that OPEC is becoming increasingly nervous about the absent success of its oil production cut deal, Nigeria’s Petroleum Minister Emmanuel Ibe Kachikwu warned the U.S. and other non-OPEC producers that “OPEC cannot continue indefinitely to just take the tank, take the blames and take the issues and yield the market space and also create the cuts that are essential to stabilise.”
Speaking to media in Abuja, the minister made an extensive case for wider cooperation on international oil price control, noting that while OPEC produces about 30 percent of global oil, the rest of the world accounts for the bigger part of total supply, so in order for any price control measures to have any real effect, all producers should begin to “come back to the pot.”
At the moment, Brent crude and West Texas Intermediate are trading at levels last seen before OPEC initiated negotiations on the production cut, with Brent at US$48.24 a barrel at 9:29am EST, and WTI changing hands at US$45.93 a barrel.
This price fall has set OPEC members of edge, apparently, even cut-exempt Nigeria, which has plans to boost its oil production significantly before this year’s end. Expectations were that the announcement of a nine-month extension of the cut beyond the June 30th deadline will push prices further above US$50, but doubts abounded and a slide that began even before the announcement only continued after May 25.
Kachikwu downplayed the role of rising shale oil output on international prices, saying “We believe that the steps that we have taken and the price range that we have created, which is in the mid-$50s is enough to encourage just enough shale and not encourage excessive shale production. If you look at the drawdown on shale over the last two, three to four months, the cumulative increases are very low.”
Data from the Energy Information Administration shows the increases have not been so modest in the last two months. In fact, they are accelerating, and June shale output is likely to be 11.8 percent higher than the figure for May.
The minister went on to announce the start of an initiative that could see producers from North and South America sit together to discuss ways of supporting prices, but did not go into detail.
The warning comes as OPEC released its monthly report on Tuesday, showing increased production from OPEC members, from 31.8 million bpd in April to 32.1 million bpd in May.
By Irina Slav for Oilprice.com
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Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.