Nigeria’s oil minister sees OPEC production freeze as likely, says Saudis are pushing for it

A wider production freeze inside of OPEC could be close at hand, Nigerian Oil Minister Emmanuel Ibe Kachikwu said during an interview with CNBC. Earlier this month, four OPEC producers and Russia agreed to maintain production at January levels, welcome news in a global market awash with crude oil.

“The Minister for energy in Qatar and the President of OPEC is leading that pact and there is a lot of conversation going on and there’s a lot of consensus building on the issue of the freeze,” Kachikwu said.

“The Saudi’s are quite frankly in the forefront of pushing the freeze issue,” explained Kachikwu. The minister said that he hoped the deal would push prices up into the $45-$50 range.

“I’m hoping a consensus can be built and that parties can begin to work together across the board, not just OPEC members, but also non-OPEC members, which is what the Gulf States and most of us have pushed for,” he said. With that, “you’ll begin to see movement upwards in those prices.”

Markets hoping for a cut, not a freeze

While a freeze in production is certainly good news, it is not the news markets have been holding out to hear. Iran and Iraq, the two OPEC members expected to bring the most additional production to market in the coming years, have both said that while they support a production freeze, they do not intend to join the agreement themselves.

“A freeze is not the same as a cut, and somewhat disingenuously, keeping crude production at January levels actually implies higher-than-expected annual output … and [that] can hardly tackle the current market oversupply,” JBC Energy said in a note.

At a conference last week held in Houston, Saudi Oil Minister Ali al-Naimi said that a freeze was the beginning step in a process to bring balance back to the market, but that outright production cuts were not in the cards.

“Freeze is the beginning of a process, and that means if we can get all the major producers to agree not to add additional balance, then this high inventory we have now will probably decline in due time. It’s going to take time,” Naimi said.

“It is not like cutting production. That is not going to happen because not many countries are going to deliver even if they say they will cut production — they will not deliver. So there is no sense in wasting our time seeking production cuts,” he added.

Overproduction is “like a cancer” – former Qatari oil minister

While OPEC’s members negotiate a wider production freeze, Qatar’s former oil minister Abdullah al-Attiyah has been pushing for more aggressive steps in recent days. The former minister called for a production cut of 2.5 MMBOPD before oversupply becomes unmanageable “like a cancer.”

“If they want to balance the market the solution will be easy. Don’t go slow. If you do, then every time the market will create a glut. Cut 2.5 million barrels and then you will balance the market in a few years,” said the former minister.

“I will ask every producer, do you want quantity or price? They say they want a reasonable price but to reach that there has to be sacrifice. If you do not sacrifice, the other will not sacrifice.

“The oversupply has grown from 1.7 million barrels per day to 3 million barrels today. I am very worried about oversupply. It is like a cancer. If you did not deal with it quickly, it would spread.”

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