As OPEC and non-OPEC nations agreed to jointly cut oil production in a landmark global pact on Saturday, Nigeria’s oil minister told CNBC he believed there is more than enough incentive for all involved to adhere to the deal.
Eleven oil producing countries, that are not members of OPEC, said on Saturday they are to cut production by 558,000 barrels per day (b/d), just short of the 600,000 targeted by OPEC in November.
“I think (this deal) is different… this time there is a major consensus. Everybody is hurting, everybody realizes you need to do this,” Emmanuel Ibe Kachikwu, Nigeria’s oil minister, told CNBC on Monday.
“Both the OPEC and non-OPEC groups understand that both sides would have to keep to the deal otherwise it falters so I think the urgency of now and the criticality of the economy they have to protect is enough incentive for everybody to align this time,” he added.
Oil prices rally
Russia pledged to cut its oil production by 300,000 b/d with the remaining 10 non-OPEC countries combining to cut a further 258,000 b/d in an agreement that represents the largest ever non-OPEC production cut.
OPEC announced last month at its headquarters in Vienna, Austria that it would reduce oil production by 1.2 million b/d in order to prop up oil prices and combat global oversupply.
Investor sentiment has been buoyed by the pact with non-OPEC nations, the first time oil producing members have agreed with non-members for 15 years.
Brent crude traded at around $56.59 a barrel on Monday morning, up 4.12 percent, while U.S. WTI was around $53.75 a barrel, up 4.37 percent.
Kachikwu targeted an oil price of around $60 a barrel moving forwards but stressed OPEC could be poised to take further action to rebalance the market next summer.
“I think this is just the beginning of the momentum itself, (the deal agreed) in Vienna wasn’t just a one off.
“In six months’ time when (this OPEC deal) will be due for another review, if we feel that the market hasn’t balanced enough, more cuts might be coming,” he concluded.
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