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Reuters
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.
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.
“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 $58 a barrel in January, Brent has now slipped to around $51, under pressure from bulging U.S. inventories and rising U.S. 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.
In Nigeria, militant attacks in the oil-producing Niger Delta have hobbled output, forcing the closure of the Trans Forcados Pipeline for all but a few weeks since February. Maintenance on the Shell-operated Bonga field has also weighed. Nigerian output in March is now expected to be about 1.43 million bpd, down from 1.54 million bpd in December, after February’s brief rise to 1.65 million bpd. Nigeria is chasing a target of 2.2 million bpd, last achieved in 2012, according to Reuters calculations. 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 U.S. bank says unrest could undermine both those targets.