As we have noted before, when oil prices are as low as they are now, OPEC members are in a classic prisoners’ dilemma. If they all adhere to production cuts, oil prices will be stronger as a result. But with governments badly dependent on oil revenues, the temptation to cheat is high. But if everyone cheats, the potential benefit of any cut is eroded.
Hopes for further production cuts at the next OPEC session appear to be fading. Nigeria has said they will not cut production further unless other members comply with October cuts. Are the two events related? Note the Nigerian oil minister took some pains to said that its statements did not indicate “a house divided.”
From (hat tip reader Michael):
Nigeria would not reduce its oil output unless OPEC members implement the agreement for cuts made in October, Oil Minister Odein Ajumogobia said, state radio reported Thursday.
“At the last meeting, when there was a cut, we found out that a lot of countries did not comply, so,before we look at any further cut, we first want to be sure that everybody has complied,” Ajumogobia told reporters in Abuja Wednesday just before the weekly cabinet meeting.
“Our primary concern at the consultative meeting will be the compliance of all members with previously agreed production allocation ceilings and to review market supply conditions,” [Nigerian] Oil Minister Odein Ajumogobia said on Thursday.