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Nigeria backs OPEC+ oil supply boost to keep prices affordable


NNPC's Kyari: Prices "very high" and need to come down

Continued rise in prices could hurt consumer and producers

OPEC+ will meet July 1 to decide on August quotas

Nigeria -- Africa's largest crude oil producer and an OPEC member -- is backing an easing of output cuts by the producer group to push prices lower and more affordable for key consumers.

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Mele Kyari, the head of state-owned Nigerian National Petroleum Corp. and the country's representative at OPEC, said June 30 that oil prices were "very high" and starting to constrain both producers and consumers.

"Producers are aware that when your prices are too high you lose your customers ... you have to bring it to a level that your customers can afford," Kyari said on national television.

Oil prices have risen more than 50% in 2021, amid a recovery in demand buoyed by vaccine rollouts and OPEC+ supply discipline.

"The only way to pull down prices is to increase ... supply. So that is what is going to happen. OPEC is going to intervene to see how we can bring down prices," Kyari said.

ICE Brent futures were up 48 cents/b at $75.24/b at 1010 GMT.

Kyari has said recently the rise in oil prices was hurting Nigeria, which relies heavily on fuel imports for its needs. Nigeria has four refineries with a combined nameplate capacity of 445,000 b/d which are all offline after years of neglect, making the country fully reliant on refined product imports.

India, the world's third-largest consumer of crude and a key customer of many OPEC producers, recently also renewed its call for the alliance to phase out its production cuts, saying the recent rise in oil prices was hurting its economy.

August game plan

The 23-country OPEC+ alliance is scheduled to convene July 1 for what could be a long day of talks, to decide production strategy for August, considered by many oil forecasters to be the month in which oil demand peaks every year.

Most analysts expected OPEC+ to increase production somewhere between 500,000 b/d and 1 million b/d.

Some say 500,000 b/d is not enough to satisfy rebounding global oil demand while a bigger increase could reverse the trend of falling oil inventories.

S&P Global Platts Analytics expects an August quota increase of 500,000 b/d and additional under-compliance or temporary waivers to meet surging summer demand.

"Saudi Arabia remains cautious on demand and Iran nuclear talks, while Russia is more focused on regaining market share as demand rebounds," Platts Analytics said in a recent note. "However, with Brent already in the mid-$70s, both will likely be committed to not overheating the market."

A 500,000 b/d increase in quotas for August would bring the OPEC+ alliance's collective production cuts down to about 5.3 million b/d, continuing the unwinding of the historic 9.7 million b/d cut that was implemented over May-July 2020.