Nigeria, exempt from OPEC’s oil output cut deal, has agreed to stop ramping up its production once it hits 1.8 million barrels per day. A milestone that is nearing, with output hitting 1.733 million bpd in June, according to secondary sources. Secondary-source data is considered closer to reality than self-reported output from OPEC members. For June, for example, the head of the NNPC said that Nigeria was producing 2.2 million barrels per day.
Just days after the cap announcement helped lift international oil prices, a militant attack took down the Trans-Niger pipeline, cutting out 150,000 bpd in daily production. What the incident highlights yet again is that improvements in Nigeria’s oil output are far from consistent for the time being.
So, while the willingness to cap production at a certain level boosted optimism, it was only for a short while. The report of the militant attack and its consequences is likely to have more of an impact on prices unless headwinds such as Libya’s unbound production growth prevail. Libya announced that it isn’t planning to join any agreement to curb output until it reaches its target of 1.25 million barrels per day by the end of the year.
These headwinds have weakened recently amid four consecutive weeks of oil inventory draws in the U.S. and indications of a slow-down in production growth across the shale patch. This has served to prop up prices somewhat, aided by an announcement from Saudi Arabia…