The Nigerian National Petroleum Corporation (NNPC) has expressed optimism that the global oil market would achieve full recovery by the third quarter of 2021.
This follows the fall of crude oil price at the international market, which is making an improvement towards its position before the outbreak of COVID-19.
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Both the World Bank and the International Monetary Fund have, following this development, warned that the global economy was headed towards another recession.
With 80 per cent dependent on oil, the Nigerian economy has been massively impacted, with government undertaking adjustments of the 2020 budget benchmarks.
Indications are that Nigeria’s economy may be making a quicker recovery than what most economic analysts are anticipating if the oil market indeed recovers by the third quarter of 2021.
Crude oil price recently climbed to an average of $40 – $42 per barrels on the back of an intervention by the Organisation of Petroleum Exporting Countries (OPEC) and its allies in the non-OPEC group led by Russia.
OPEC and its allies under the OPEC+ agreed to cut supply by up to 10 million barrels per day between May and June 2020 in an attempt to strengthen the price and stabilise the crude oil market.
Due to the impact of the intervention and the gradual rise in price, the group agreed last week to extend the initiative to the next phase, till the end of July 2020, and to cut about eight million barrels per day of supply between July and December 2020.
Meanwhile, the Group Managing Director of the NNPC, Mele Kyari, told Bloomberg on Tuesday that if the current situation was sustained, the oil market might attain full recovery by the third quarter of next year.
Mr Kyari said Nigeria saw the OPEC+ output cut initiative as an opportunity to wait for the rebalancing of the oil market, to halt her continued spending to produce oil for free due to supply-demand in balance.
He said:
We have started seeing signs that the output cut initiative is working and achieving its target objective by pulling down the supply and creating a situation that will bring up price to a level we can recover our cost and make some marginal profit to continue in our business.
