Oil prices have been under pressure again this week. With West Texas Intermediate yesterday falling 2 percent, to below $49 per barrel.
And some surprising numbers this week show that slide is likely to continue. With the world’s largest oil-producing nations pumping out more crude than many energy observers are expecting.
That’s OPEC. A group oil investors have been looking to as a saviour — expecting that production cuts from key nations like Saudi Arabia will help support global oil prices.
But a survey released this week by Platts shows that OPEC output is far from declining. In fact, OPEC production in July hit its highest level for 2017 — coming in at 32.82 million barrels per day, up 330,000 b/d from June.
There’s one big reason for OPEC’s surging production: Libya. A nation that saw its July production rise 180,000 barrel per day — as key oil fields across the country restart under ceasefire deals between the central government and local rebel factions.
All told, Libya’s July production rose to just under 1 million barrels per day. A big jump from the 700,000 barrels per day the country was producing as recently as March.
The concerning thing for OPEC is that Libya is exempted from the recent agreement on production cuts — and thus free to ramp up output. Which has put OPEC as a whole well above its quota for total production, with July’s output being 920,000 b/d above the agreed-upon ceiling of 31.9 million barrels.
Libyan officials have said they want to increase production further. With the government targeting 1.25 million barrels by the end of this year.
At the same time, production from the U.S. is also rising. With the U.S. Energy Information Administration this week increasing its forecast for 2017 domestic output.
All of which suggests that OPEC’s much-lauded cuts are fading as a driver for higher crude prices. Watch for more numbers on Libya’s production to see if output could go higher from here — and for potential new action from the cartel to address the recent surge.
Here’s to living outside the law.
By Dave Forest
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