Nigeria has hinged their hopes on a “historic” agreement between major oil producers to cut output by 10 million barrels per day, this could boost prices by $15.
Oil cartel OPEC announced the agreement after marathon talks aimed at halting a price war after Saudi Arabia threatened to flood the markets.
But Mexico’s refusal to sign off on the shared cuts have stalled an agreement.
The agreement would see OPEC members and allied non-members slash production by 10 million barrels per day in May and June and eight million from July to December.
Nigeria, Africa’s biggest oil producer, said that would see its output fall to 1.412 million barrels per day over the initial period.
“It is expected that this historic intervention when concluded will see crude oil prices rebound by at least $15 per barrel in the short term,” the country’s oil minister Timipre Sylva said in a statement.
A price war between Russia and Saudi Arabia contributed to the fall, which saw international benchmark Brent crude slide under $25 a barrel.
Prices have rebounded recently as speculation about a deal mounted, with Brent finishing the day Thursday at $31.48 a barrel.
Analysts have expressed doubts about the impact of the production cut given the extent that demand has dropped and the massive stockpiles that have been built up in recent weeks.
What will $15 Fix in a Broken economy?
The collapse in oil prices has put the Nigerian economy in a quagmire.
The government has had to cut its national budget for 2020 after almost halving its benchmark oil price prediction from $57 to $30.
The potential “price rebound may translate to additional revenues of not less than 2.8 billion dollars” for the country.
Despite the record size of the potential cut, oil prices moved lower on Thursday as investors feared it would still not be enough to combat the unprecedented demand loss from the coronavirus.
“Although 10 million bpd will help the market on the short term to not fill up storage, it is a disappointing development for many, who still realize the size of the oil oversupply,” said Rystad Energy’s head of oil markets Bjornar Tonhaugen.