Abu Dhabi: Libyan oil production, which has been steadily rising in the last two months, could pose a risk to the production cut deal reached between Opec and non-Opec member countries least year, analysts said.
From 300,000 barrels a day in August, Libya’s oil put has gone up to about 700,000 barrels a day currently.
Libya, along with Nigeria, has been exempted from the production cut agreement, due to the impact of conflict and unrest in the country.
“If Libyan production continues to go up higher and higher, it could be unsettling in terms of any price gain or price rally,” said Edward Bell, commodity analyst at Emirates NBD.
He said oil infrastructure in Libya remains quite vulnerable to various militant groups that can seize control of pumping stations to disrupt oil production.
Libya in December reopened the Sharara oilfield, which supplies Zawiya, allowing for exports to resume from the terminal in western Libya. Almost 1.9 million barrels are set to load from Zawiya this month, according to Bloomberg. Libya pumped about 1.6 million barrels a day before an uprising in 2011 toppled the nation’s leadership. With production rising, Libay’s national oil corporation Chairman Mustafa Sanalla said on December 21 that output would reach 900,000 barrels a day early this year and 1.2 million barrels a day by the end of 2017.
“Production could steadily increase to 900,000 barrels per day in the next few months. However, different factions still control the various oil ports, pipelines and fields across the country, so disruptions remain possible with little warning if the situation escalates on the ground,” said Matthew Sinkez, regional manager, risk advisory services at Whispering Bell. In a historic deal on November 30, thirteen member Opec member countries and countries from outside the group have decided to cut production by about 1.8 million barrels per day in order to stabilise oil prices.
Oil prices have rallied following the deal with international benchmark Brent surpassing $57 per barrel in recent times.
Expressing optimism about the deal, Bell said major NOCs (national oil companies) in Gulf countries are taking necessary steps to limit production in accordance with the deal.
“Even Angola had announced steps to cut production. So clearly, the market believes that the words are being met with action and that’s certainly giving support to the market right now,” Bell said.