OPEC – An oil price rally has already stumbled since the deal, but Nigeria and Libya are not to blame. Output from both nations has slipped since December and violence in the two African states makes their ambitions to hike production look optimistic.
When OPEC reached a deal last year to cut oil output, the decision to exclude Nigeria and Libya from the restrictions was seen as a risk to the group‘s efforts to curb a global crude glut.
“The success of these cuts, debatable as they may be, will not hinge on Nigeria and Libya,” said ING analyst Hamza Khan.
OPEC members and non-OPEC producers agreed to cut output by 1.8 million bpd for six months from Jan. 1. OPEC has broadly cut the amount pledged, while others have not delivered in full.
After rallying above USD 58 a barrel in January, Brent has now slipped to around USD 51, under pressure from bulging US inventories and rising US shale production.
Since the OPEC deal, Libyan production has dipped to 615,000 barrels per day (bpd) from 630,000 bpd in December, as militias battle to control export sites in the east of the country. Libya was producing 1.6 million bpd in 2011.
Morgan Stanley forecasts Libyan production could rise to 900,000 bpd in the second half of 2017, while Nigeria could produce 1.6 million bpd in the same time frame. But the US bank says unrest could undermine both those targets.
“It is possible that unplanned disruptions increase further,” Morgan Stanley said in a March 10 research note.