NNPC: Mele Kyari Rules Out Oil Price Rise, Projects Collapse

The Group Managing Director of Nigeria National Petroleum Corporation (NNPC), Mele Kyari, has doused the hope that the oil price will continue its surge following a rise in the price of the commodity. According to Kyari, the oil price will collapse again as it is only bloated by sentiment.

Kyari said the surge in oil price wasn't influenced by demand, but rather sentiment, and so the price will still decline because production levels are still high and supply will surpass demand. He made this comment while speaking during a weekly programme tagged ‘Half-Time Talk’ organised by a United Arab Emirates-based communication and research firm, Gulf Intelligence, on Wednesday.

Oil Will Slide Back To Early-March Decline

He projected that at the end of 2020, there would be over 79 million barrels of excess supply, so if there will be balance with supply and demand, then it would in 2021. Kyari stated that the price surge is due to the cut in production, so oil prices will slide back to what it was in March.

"Everyone should know that it is not sustainable as long as the production level remained at the Pre-COVID range. The supply will overshoot the demand in a short time and we will likely slide back to where we were in early March 2020.

“The recent drive we have seen in the price of crude is largely driven by sentiments than demand because we have not seen the significant rise in the demand. There is no 100% conformity with the cut and that means that the volume is still there. The price jump appears cosmetic to me and if we don’t contain the supply, we could slide to the early March price level.”

Nigeria Will Not Cut To Balance For May & June

According to Kyari, Nigeria will only conform with the cut agreement at the end of June this year, but as reported by AllNews, Nigeria didn't produce in line with the agreement. AllNews had reported that Iran and Nigeria were among countries that didn't meet the cut deal in May.

Kyari said meeting the cut will be easy for Nigeria as the country's oversupply is a little less than 100,000 per barrel. He also disclosed that Nigeria will not need to cut more in July and August to balance for May and June despite the Federal Ministry of Petroleum Resources stating via a tweet that the country will balance up. 

Why Nigeria Couldn't Achieve Agreed Cut 

While explaining the reason Nigeria couldn't achieve the cut agreed, Kyari stated that “The reasons are very different. Managing reservoirs in Nigeria is very different from other jurisdictions. You have to have a plan around the wells and if you pull them down at the same time, you may not be able to recover them.

"Looking at the last 10 days, we have gone below conformity, which we are still trying to manage. It is a gradual process to cut down by well and reservoirs levels. We know that the current numbers we are seeing today will take us to conformity by the end of June.”