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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Will Libya Be First To Ditch The OPEC Production Deal?

Just two weeks after it pledged to cap its crude oil production at the level of 1 million barrels daily, Libya has sent a signal that it actually has immediate plans to raise this, according to media reports.

In a rare meeting this weekend, the Prime Minister of the UN-recognized Government of National Accord met with the heads of the National Oil Corporation and the Libyan central bank to discuss funding for boosting crude oil production.

As Reuters notes, the relationship between PM Fayez Seraj and the central bank governor, Sadiq al-Kabir Sadiq, have not been the best, with regular clashes over fiscal reform and monetary policy. The tension is significant as the central bank is where the income from crude oil exports—Libya’s principal revenue source—goes.

To add to this, the overall political situation in the country remains unstable. This prompted analysts to factor in possible future oil production outages in the country in their overwhelmingly bullish oil price forecasts for 2018.

Libya, along with Nigeria, was originally exempted from the OPEC oil production cuts, agreed last November. The country, like Nigeria, is heavily dependent on oil revenues and was struggling—as it still is—with a rising budget deficit and soaring inflation amid continuing conflicts between various armed groups.

These conflicts caused a series of production outages at some of its largest oil fields last year, which had a marked bullish effect on international prices. This, however, was not the case with reports about growing oil production, despite the outages. That’s why the news about both Libya and Nigeria joining the cuts was eagerly welcomed by traders and analysts.

The two have agreed to keep their combined production at no more than 2.8 million bpd until the end of 2018. Yet this latest report about plans to fund a production increase could rekindle doubts about how long some OPEC members would stick to their promises to curb production.

By Irina Slav for Oilprice.com

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  • Filip Subocz on December 11 2017 said:
    Wasn't the "output cut" deal with a special addition which took out Iraq and Libya? Since in Iraq as we know the war was/(is? guerilla at least maybe a bit?!) against the ISIL or how we call it simply "IS", Islamic State. In Libya militia at least in contact over phones or radio or internet etc to the ISIL were trying to take the power in Libya... it still has never really recovered since in 2011 "we" (many European air missions, this is expensive, one hour flying can even cost on a old F-16 or a normal F-18 I think something like 30,000 US-$ per hour... for a bit larger (= more fuel, stronger engines more expensive to replace them I guess when their life time is over, first series produced jet was nazi ME 262, the I think JUMO 001 called engines were from BMW and had a life time of 4 hours flying....),

    US was there but not the absolute leader... United Kingdom fired away some rockets from Raytheon, the rockets were like "good thing, we use it, its overkill but otherwise they reach a too high age and are worthless... and it was 7 years ago, otherwise they still would be somewhere in a storage or ammo room of the navy (submarine launch) or army (ground launch, but it was a submarine version I think...

    Libya could take another oil field and the most important an oil port, but holding it... that is why they were not included in the cuts I think... they need every cent in IRaq (even though Kurds fought 10 times better than the weak new Iraq Army, in Libya the war was ongoing between rivals and now some groups reunited, I think there are much more than just 2 blocks right now... one "ISIL" and groups united which were former enemys... also Libya produces very low amounts if you look at reserves, the quota must beee much higher, compare it with bordering Algeria... same production before 2011 but only a bit more than 1/4th of the Libyen oil reserves....

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