Libyan oil production is expected to exceed 1m barrels per day, analysts say
The rise in oil production from Libya and Nigeria may put pressure on Opec member countries to undertake deeper cuts to rebalance oil markets, analysts said.
Libyan production is about to exceed 900,000 barrels per day, and with likely gains from the Waha and Nafoora fields over the coming weeks, it could exceed 1 million barrels per day later in the third quarter, according to James Davis, head of oil supply at FGE London. Those numbers helped raise Opec’s production in June to the highest this year.
Members of the Organisation of Petroleum Exporting Countries boosted their output by 260,000 barrels a day compared with May, according to a Bloomberg News survey of analysts, oil companies and ship-tracking data. Half of the increase came from Libya and Nigeria, which are exempt from making cuts under the deal agreed between Opec and its allies, which came into effect from January 1 this year. The agreement was further extended by nine months till March next year following Opec meeting in Vienna on May 25. Opec member countries in cooperation with their non-Opec counterparts are cutting production by 1.8 million barrels per day in order to rebalance oil markets.
“If Libya and Nigeria can maintain output at current levels, it will result in the remaining Opec members having to cut supply deeper than their current plans in 2018 in order to keep markets balanced,” Davis said.
He said the National Oil Corporation (NOC) of Libya’s target of 1.25 million barrels per day by year end is optimistic but the precarious security situation is expected to keep the production levels in the range of 800,000 to one million barrels per day over the short term.
“Higher supply from Libya clearly affects global supply, demand balances, but other factors need to be taken into account too. Nigeria is also staging somewhat of a recovery in its production. At the same time, non-Opec supply growth is catching up with demand growth in 2018.”
National Oil Corporation also reached a temporary agreement with Wintershall of Germany to resume oil production last month and is a positive step for Libya’s oil and gas sector, according to Matthew Sinkez, regional manager of risk advisory services at Whispering Bell.
“The agreement with Wintershall may result in an additional 160,000 bpd. Oil production has been on an upward trajectory in recent months and this increase would bring the NOC much closer to its goal of reaching 1 million barrels per day.” Nigerian production in May stood at about 1.6 million barrels per day, up from 1.5 million barrels per day in April, according to Opec monthly report released last month.
The growth in production from Nigeria and Libya along with rise in rig count in the US had a bearish impact on oil prices in the last couple of weeks.
Brent slid to as low as $44.82 per barrel on June 21 before rising to slightly more than $49 per barrel on Tuesday due to slowdown in the US production.