Nigeria has agreed to voluntarily cut its daily crude oil production by 939,000 barrels between January and March.
This is according to a voluntary production cuts document published by the Organisation of Petroleum Exporting Countries (OPEC).
Full compliance with the cuts means that Nigeria’s daily production will be 1.51 million barrels per day between January and March.
Nigeria’s 2021 budget is predicated on daily crude oil production of 1.86 million barrels (including 400,000 barrels of condensate) at $40 per barrel.
The decision was reached at the 13th OPEC and non-OPEC ministerial meeting (ONOMM), that held via videoconference on Tuesday, January 5, 2021.
At the meeting, Saudi Arabia announced its decision to cut one million barrels of crude oil from its daily production in addition to its quota.
In total, 7.2 million barrels will be cut from the market in January, 7.125 million barrels in February and 7.05 million barrels in March.
OPEC and its allies adopted a production cut system to resolve a crude oil supply glut in the global market and shore up prices.
In April 2020, all parties agreed to cut daily supply to the global market by 10 million barrels in May and June.
This was subsequently reduced to 8 million barrels per day between July and December 2020.
The 10 million barrels per day cut is scheduled to last for two months; May and June 2020.
For the subsequent six months, from July to December 2020, producers agreed to adjust the cuts to eight million barrels per day.
It was initially planned that the cuts would be reduced to 6 million barrels per day for 16 months between January 2021 and April 2022 however, reduced demand due to the COVID-19 pandemic has set the organisation back.
Crude oil prices have responded favourably to the production cuts with Brent Crude, the global benchmark for crude oil grades, climbing to $56 per barrel while the price of US West Texas Intermediate has hit its highest point since February at $53 per barrel.