Angola’s minister of finance H.E Vera Daves signed on April 22nd a ministerial order suspending the implementation of all contracts signed under the Public Investment Programme whose source of funding has not yet been definitively secured. This is one of a number of emergency measures, including a freeze in public sector hiring that was announced in recent weeks in response to the oil price crash and the expected reduction in government revenue for 2020. Minister Daves’s order is in line with Presidential Decree no. 96/20 of April 9th which declared a state of emergency in response to the Covid-19 pandemic, which it considered a case of force majeure.
These budgetary restrictions do not only represent the government’s attempt at fiscal responsiveness and responsibility, they also give credence to Angola’s commitment to adhere to its most recent engagements within the Organization of the Petroleum Exporting Countries (OPEC). On April 9th, following an oil price crash that drove down oil prices to historic lows below US$20/barrel, oil producers including Angola within the framework of OPEC+, led by Russia and Saudi Arabia, agreed to cut their supplies to the global market by an overall 23% compared to October 2018. These cuts are intended to reverse the downward trend in prices when combined with an expected recovery in crude oil demand in the aftermath of widespread relaxations in Covid-19 related restrictions, expected later this year. Angola, which is currently Africa’s second largest crude producer behind Nigeria with an estimated average daily production pre-agreement of 1.4 million barrels per day, is set to drop production to and average daily output of 1.18 million barrels per day.
“Compliance is key for the credibility of OPEC and their ability to deliver on stable crude prices. We salute the resolute action of the government of Angola and the efforts of H.E Diamantino Pedro Azevedo, Minister of Mineral Resources, Petroleum and Gas, in delivering the April 9th OPEC deal”, said Sergio Pugliese, President of the African Energy Chamber for Angola.
The cuts are due to last for an initial two-month period through May and June. By the start of June, reports about compliance in the month of May are likely to be key in achieving the intended effect.
H.E. Mohammed Sanusi Barkindo has been successful in steering the organisation during periods of heightened geopolitical tensions, bringing together producers with opposing interests in the interest of market stability. African producers like Angola and Nigeria continue to be key in ensuring that OPEC is effective. In that light, decisions towards ensuring compliance like those made by Angola are important for the entire industry globally.