OPEC seems to be willing to let exempt members Libya and Nigeria boost their crude oil output further before asking them to join the supply control deal aimed at propping up prices. That's according to Bloomberg's Ben Sharples, reporting on a meeting of OPEC ministers ahead of a wider ministerial meeting today in St. Petersburg.
Sharples noted that both Nigeria and Libya have signaled they are not opposed to capping their production at a certain level, over 1 million bpd for both. Libya, he added, had said it would be willing to stop building production when it hits 1.25 million barrels daily. Nigeria's oil minister said earlier this year Abuja is targeting 1.8 million bpd before it considers joining the cut.
The oil cartel seems optimistic about the effect of the production cut deal despite falling compliance rates and growing production both in OPEC and in the U.S., which is not a party to the deal. Reuters quoted secretary general Mohammed Barkindo as saying that although so far progress with the rebalancing of global oil supply has been slow, it should pick up in the second half of the year.
As drivers of this acceleration in supply decline, Barkindo pointed to the satisfactory compliance rates among OPEC members and its partners, three consecutive weeks of falling U.S. crude oil inventories as reported by the EIA, and recovering demand. Related: Daily OPEC Oil Prices Now Public For The First Time Ever
Yet, Russia may beg to differ with OPEC on the issue of Nigeria and Libya joining the cuts. In an interview with the Financial Times ahead of the ministerial meeting, Alexander Novak said the two African producers should join the price-propping effort as soon as their output stabilizes.
"I think that these countries should join other responsible oil producers and contribute to the market stabilisation initiative as they reach a stable level of output. We believe that once oil output in Libya and Nigeria stabilises, there will be less uncertainty on the market as to their future moves," Novak told the FT.
By Irina Slav for Oilprice.com
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