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Oil Price Rises to $58, OPEC Exceeds Output Cut Target

The Organisation of Petroleum Exporting Countries (OPEC) on Wednesday said its members had achieved 101% adherence to crude oil output cut mandatorily agreed upon last year to curb huge supply

FILE PHOTO: The logo of the Organisation of the Petroleum Exporting Countries (OPEC) sits outside its headquarters ahead of the OPEC and NON-OPEC meeting, Austria December 6, 2019. REUTERS/Leonhard Foeger

The Organisation of Petroleum Exporting Countries (OPEC) on Wednesday said its members had achieved 101% adherence to crude oil output cut mandatorily agreed upon last year to curb huge supply glut.

This is coming as oil price rose to $58 per barrel yesterday hitting over 11-month high after major producers showed they were cutting crude output in line with their commitments on restraint.

Disclosing this at the 26th meeting of the Joint Ministerial Monitoring Committee (JMMC), in Vienna, held via video conference under the chairmanship of Prince AbdulAziz bin Salman, the organisation expressed hope that the oil market will recover in 2021.

OPEC highlighted Nigeria’s efforts at meeting its own output cuts, describing it as commendable.

The committee emphasised the ongoing positive contributions of the Declaration of Cooperation (DoC) in supporting a rebalancing of the global oil market in line with the historic decisions taken at the 10th (extraordinary) OPEC and non-OPEC Ministerial Meeting on 12, April 2020.

The decision was to adjust downwards overall crude oil production, following the extraordinary hit taken by the commodity as a result of the COVID-19 pandemic.

The committee acknowledged the positive performance of participating countries, especially their adherence to the deal made in April last year.

“Overall conformity with the original production adjustments was 101 per cent, reinforcing the trend of high compliance by participating countries.

“The committee noted that since April 2020 ministerial meeting, OPEC and non-OPEC countries have adjusted oil production down by a cumulative 2.1 billion barrels, stabilising the oil market and accelerating the rebalancing process.

“The committee further noted that DoC participants pledged to achieve full conformity and make up for previous compensation short-falls, and stressed the importance of accelerating market rebalancing without delay. The progress of Nigeria in this respect was well noted,” it stated.

According to the cartel, while economic prospects and oil demand will remain uncertain in the coming months, the gradual rollout of vaccines around the world is a positive factor for the rest of the year, boosting the global economy and oil demand.

OPEC urged all participating countries to remain vigilant and flexible given the uncertain market conditions and to stay on the course.

The committee thanked the Joint Technical Committee (JTC) and the OPEC secretariat for their contributions to the meeting, while the next conference of the JMMC is scheduled for March 3, 2021.

Meanwhile, oil price rose to $58 per barrel on Wednesday hitting over 11-month high, after major producers showed they were cutting crude output in line with their commitments on restraint.

Brent crude was up $58.71, a 2.18 per cent increase, while US oil gained 2.36 per cent to hit $56.86 a barrel.

Crude production by the OPEC increased for a seventh month in January, after the cartel and its allies agreed to ease supply curbs further, but the growth was smaller than expected.

OPEC Secretary-General, Dr Sanusi, Barkindo, expressed delight about the new development at the opening of the OPEC+ panel meeting on Tuesday.

“With the crude oil market currently switching into backwardation, we are hopeful that 2021 will be a good year for overall demand,” Barkindo said.

Meanwhile Nigeria’s House of Representatives Ad-hoc Committee on Crude Oil Theft, on Wednesday said crude oil worth over $20 billion could not be accounted for between 2005 and 2012.

The Chairman of the Ad-hoc Committee, Hon. Peter Akpatason, during the resumed hearing of the committee in Abuja added that the same infractions were observed between 2016 and 2019.

He stated that the amount was arrived at after a forensic audit the committee commissioned.

Besides, the House Committee on Public Accounts also said it uncovered over N5 billion waivers illegally granted to China Harbour on imported construction materials.

Akpatason told the gathering that the committee resolved to resume the investigation on crude oil theft in Nigeria, having gone through submissions from stakeholders in the sector.

He said while the committee was not set up to witch-hunt any organisation, it would ensure the trial of anyone found culpable.

”The effects of crude oil theft cannot be overemphasised, and this has lasted for too long. As patriots, it is our collective responsibility to see to the end of this stealing. The ad-hoc committee has identified the key role DPR as the agency of government in the sector hence your re-invitation today to enable us to work together and come up with a common front on ways to tackle this matter and if not completely put an end to it, reduce it to its barest minimum.

“DPR is the agency of government saddled with the responsibility of monitoring crude oil production and lifting. The committee requested and obtained schedules of crude oil produced and lifted between 2005 to 2019.

“Forensic analysis of the data revealed a very wide margin between what was reported produced and what was lifted. Between 2005 and 2012, DPR reported production of 1,746,621,167 barrels from four sampled oil terminals of Escravos, Bonny, Forcados and Bonga.

“Out of these production volumes, only 1,417,200,848 barrels were accounted for, as having been lifted officially. A whopping volume of 329,420,319 barrels, valued at over $20 billion, could not be accounted for. The same trend of infractions was observed in the years 2016-2019.

“The committee through the analysis of submissions to the committee has raised issues requiring clarifications from DPR these issues range from unprocessed crude oil, suspected stolen/diverted crude oil, discrepancies in records, use of inappropriate devices and technologies for measurement and gauging despite huge budgetary provisions. During the analysis, the committee made discoveries that require clarifications from major stakeholders,” he added.

In his presentation, Director of the Department of Petroleum Resources, Mr. Sarki Auwalu, blamed crude theft on third party interference, particularly at the land terminals.

He said: ”The problem is that we have 30 terminals in Nigeria and these terminals, five are land terminals. Most of the thefts, they are coming from land terminals because the land producers, they have to use pipelines to transport the crude into the terminals for export. In the process, you have a lot of third party interferences in which those points of theft were there; small volumes that account for the larger volume are being taken and they are being stolen.

”So, most of the discrepancies in production and export, you can easily calculate the theft volume. And the theft volume, if not all, come from the land terminals. But the offshore terminals, it is actually practically impossible to steal crude from offshore terminals, since it is from the bottom of the sea.”

Meanwhile, the House of Representatives Committee on Public Accounts has uncovered over N5 billion waivers illegally granted to China Harbour on imported construction materials.

Speaking during the investigative hearing into the audit query issued by the office of the Auditor General of the Federation (oAuGF) against Nigeria Customs Service (NSC), Chairman of the Committee, Hon. Wole Oke, frowned upon the complacency of various regulatory agencies that approved such waivers in breach of due process.

Oke explained that the auditor general, in his query, expressed concern over the depletion of revenue accruing to the Federation Account.

He accused some multinational companies of indulging in tax avoidance abuse, transfer service schemes, which they use to undermine revenue generation in Nigeria.

Oke reiterated the need for some House standing committees to intensify their oversight functions in the bid to block leakages and reduce the impunity being perpetrated by the MDAs.

He underscored the need for standing committees to have detailed information on the number of shipping and cargo companies operating in the country, with a view to ascertaining the details on importation and revenue due to the federation.

He said: ”The solution is that we should step up our oversight and ensure that nobody is undermining the revenue accruing to this country, either through these schemes I’ve mentioned or fraudulently. Like in the case of China Harbour, China Harbour got a contract in Nigeria through contract financing and then you are claiming duty waiver of over N5 billion on items and materials that are available in Nigeria. They are importing them, they kill local industries, you are injuring us from both ends.

“We just have to resolve that the MD of China Harbour should cause appearance. All they are trying to do is to cover up when it comes to capital flight they don’t mind, but when it comes to accountability they are running away. And those who granted the duty waiver we must ask them and that’s why we invited the Ministry of Finance to cause the appearance to come and defend the duty waiver they gave to you.”

Emmanuel Addeh, Udora Orizu

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