Libya, Nigeria help push Opec June output up nearly 400,000 bpd
Both countries reluctant to join production deal despite output rises
Output by Opec’s 14 members surged by a combined total of nearly 400,000 barrels per day last month, to 32.6 million bpd, with recovering Libyan and Nigerian production the main contributing factor.
Libya and Nigeria are both exempt from the output-restraint deal that has been observed by other Opec members and producers outside the group since January. The exemption was granted to allow both countries to rehabilitate oil infrastructure that had been sabotaged by militants in recent years, giving them leeway to rehabilitate their industries.
The monitoring committee for the output deal, which includes 12 non-Opec members, is scheduled to meet in Russia later this month to discuss compliance and other issues. Libya and Nigeria have been invited to attend that meeting to discuss how they might contribute to the restraint effort, which has so far had very limited success in bringing down world inventories and propping up prices.
World benchmark North Sea Brent crude oil futures were up 76 cents at US$48.28 a barrel in afternoon trading Arabian Gulf time. That’s up from a low this year below $45 a barrel at the end of last month, but down from the mid-to-high $50s earlier in the year, and nearly back to the level before the deal last November.
In its monthly report, Opec said “secondary sources” - the range of analysts, newswire surveys and other references Opec uses as a benchmark - estimated Nigeria’s output at just above 1.7m bpd last month, up by about 97,000 bpd from May's figure, by and more than 200,000 bpd from April’s low point.
Libya’s output was 852,000 bpd in June, up by 127,000 bpd from May, and 300,000 bpd higher than April's output.
Nigeria’s oil minister, Emmanuel Ibe Kachikwu, has said the country would consider curbs when output passes 1.8 million bpd.
Earlier this week, at an oil conference in Istanbul, Kuwait’s oil minister, Essam Al Marzouq, said Mr Kachikwu would not be able to take up an invitation to attend the Russia meeting, but he hoped a Nigerian delegation would attend anyway.
Royal Dutch Shell last month lifted force majeure at Nigeria's key Forcados oil terminal it operates after repairs of damage caused by militants. Output from the repaired terminal is expected to raise the country's output to at least 2 million bpd.
Libya’s production, meanwhile, this month was above 1 million bpd for the first time in four years. Mustafa Sanalla, the head of the country's state-run National Oil Corporation, said he is targeting 1.1 million bpd by next month.
Other Opec members also saw their output rise last month. Saudi Arabia, Iraq and Angola’s combined output for the month of June was up by 176,000 bpd.
The monitoring committee for the production cut deal is made up of Algeria, Kuwait, Venezuela, and two non-Opec countries – Russia and Oman. Representatives from Saudi Arabia also usually attend committee meetings.
Market observers in the production cut deal has waned since early this year.
“The imperative to secure market share will be pressing [next year] in a context of strong supply growth outside the producers' bloc,” said Ed Bell, commodities analyst at Emirates NBD. “We expect Opec will return to a strategy of production growth,” he said, despite the group’s commitment to extend their restraint deal through the first three months of next year.
Opec in its report said it expects non-Opec supply to increase 800,000 bpd this year to 57.8m bpd, and by another 1.14m bpd next year. Given the demand outlook, that would leave no room for Opec growth next year.
Updated: July 12, 2017 03:17 PM