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Remission as OPEC excludes Nigeria, Libya from volume cut
At a talk opening this Monday in Russia, petroleum exporting countries including OPEC and its collaborating partners have agreed to remove Nigeria from earlier proposed production cuts, giving the country some temporary relief.
In June, Nigeria boosted crude output to 1.75 million barrels a day from 1.5 million barrels in December, while Libya’s production climbed to 840,000 barrels a day from 630,000 barrels, according to data compiled by Bloomberg.
Nigeria has predicated its 2017 budget on crude production of 2.2 million barrels per day.
On Sunday, OPEC Secretary General, Mohammad Barkindo told reporters in St. Petersburg that the oil market will need more Libyan and Nigerian crude as it re-balances at a faster rate later in the year after a slow start.
Two people familiar with the planned talks revealed both countries have insisted they’ll need to keep pumping at a higher level before they can join a global effort to stem a supply glut.
Nigeria is ready to cap or even reduce supply if it can maintain output of 1.8 million barrels a day, said the two people, asking not to be identified because the information is confidential.
Libya isn’t planning to join any agreement to curb output until it reaches its target of 1.25 million barrels a day by December, they said. Producers including Saudi Arabia and Russia are gathering in St. Petersburg, Russia, to assess the effectiveness of an international accord to pare output.
Over the weekend, Saudi Energy Minister Khalid Al-Falih met with delegations from Libya and Nigeria to discuss their production recovery plans, “including the challenges they currently face,” the Organization of Petroleum Exporting Countries said Sunday in a statement on its website.
Both African OPEC members were exempt from the cuts agreement, which took effect in January, because of their struggles to restore production amid internal strife.
Their increased output in recent months has prompted speculation that OPEC may seek to limit their production to help stabilize oil markets.
Brent crude has declined 15 percent this year on concerns that rising output from Nigeria and Libya, as well as the U.S., is offsetting the cuts that OPEC and allied producers including Russia extended through March.
“The re-balancing process may be going on at a slower pace than we earlier projected, but it is on course, and it’s bound to accelerate in the second half,” Barkindo said.
Oil demand is expected to grow by two million barrels a day in the second half, he said, without specifying if he was comparing that with the same period of 2016 or the first half of this year.
“We will of course discuss the situation in all countries, including Libya and Nigeria,” Russia’s Energy Minister Alexander Novak told reporters.
“Russia has reduced output by 300,000 barrels a day since October, in line with its agreement to cut production.”
One of the people familiar said, Ministers will on Monday discuss other ways to accommodate the recovering output in Libya and Nigeria.