Oil prices crashed on Friday, after the Organisation of Petroleum Exporting Countries, OPEC, and its Allies, failed to reach a deal on oil production cuts.
The decision followed Russia’s refusal to tighten supply, to counter the effects of the coronavirus outbreak on oil prices and the global economy.
Russian Energy Minister, Alexander Novak, had on Friday, told Reporters in Vienna, that the talks between OPEC and his OPEC+ grouping, have failed to bring about a deal.
“Regarding cuts in production, given today’s decision, from April 1, no one, neither OPEC countries, nor OPEC+ countries, are obliged to lower production”, he said.
OPEC’s Secretary-General, Mohammed Barkindo, stated that the meeting has been adjourned, although consultations would continue.
“At the end of the day, it was the general, painful decision of the Joint Conference, to adjourn the meeting”, he explained.
“We have some few knotty issues, but the norm is here to have everybody on board, unanimity.”
Prior to the meeting’s official start, Ministers from Saudi Arabia, the world’s number three oil producer, and Russia, the number two, had huddled for hours of bilateral discussions.
However, as soon as the news of a “no deal” began to seep out, oil prices plunged more than 7 percent, with Brent North Sea crude tumbling to $46.14 per barrel, and WTI to $42.26.
Virtu Financial Founder, Vincent Viola, told CNBC, on Friday, that he believes that oil will test the $35 level again, which not adjusting for inflation, is more like $28 to $32. In turn, this will pressure many American producer, -and others from across the world.
“The exploration and production patch is going to go through a dislocation, and you are going to see a lot of bankruptcies and replacements, and quite frankly, restructuring of the domestic oil market”, he said.
Oil prices have tumbled into bear market territory, since the coronavirus outbreak led to softer demand, especially in China. Stakeholders expected OPEC to step in, in a bid to prop up prices.
The oil Cartel and its Allies, have since early 2017, tried to support prices through cuts on production, initially of the order of 1.2 million barrels per day.
In December, they announced a further 500,000 barrel cut, with Saudi Arabia adding a “voluntary” contribution of 400,000 barrels.
OPEC wanted the new proposed cuts to run until the end of 2020, but Moscow foot-dragged and prices tumbled.
As at 11:18pm, on Friday night, checks revealed that Brent Crude sold at $45.54, while Nigeria’s Bonny Light sold at $51.94, according to details on oil data sites.
Again, the stumbling prices fall short of Nigeria’s projected oil revenue benchmark of $57 per barrel, with a potential negative impact on the nation’s estimated revenue for the fiscal year.
In its 2020 budget, Nigeria pegged oil production at 2.18 million barrel per day, with a price benchmark of $57 per barrel. But in recent weeks, the impact of the coronavirus has sent prices tumbling, crashing at $51 per barrel. On Friday, prices crashed further.
Earlier in the week, Nigeria’s Minister of Finance, Budget and National Planning, Zainab Ahmed, had said that the outbreak of Covid-19 (coronavirus), negatively impacted Nigeria’s oil revenue. She also announced that a mid-term review of the 2020 budget will be carried out, to reflect the realities on ground.
Mrs. Ahmed, however, revealed that the oil nation’s oil production has increased between two million barrels and 2.1 million barrels per day.
“We are concerned in the current drop in oil price, because it is now below our budget”, she noted.
“I am glad to inform you that our oil production as at today, is two million barrel per day, and at times slightly higher. That in its self will be a cushioning effect for us in the current oil price.
“We will do a mid-term review, and if the impact is so much, we will need to do an adjustment in the budget, working together with the National Assembly.”