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OPEC should approach Libya and Nigeria, the two exempted OPEC members who were allowed to continue raising their crude oil output despite the November 2016 deal, Iran’s Oil Minister Bijan Namdar Zanganeh told media. The official said that OPEC members are compliant with their lower production quotas at an “acceptable” level, but rising supply from Libya and Nigeria is hampering the cartel’s efforts to rebalance the oil market.
“OPEC’s actions are working and compliance is acceptable overall, although there needs to be some change,” Zanganeh said, as quoted by Bloomberg. “Changes are really related to Libya and Nigeria and the 100 percent compliance of everyone.”
Rising production from the two exempt OPEC members—chiefly from Libya—has indeed slowed down the oil price improvement that OPEC targeted with its agreement. The North African country set a target of pumping more than 1 million bpd by the end of July, and it reached it early on—an accomplishment that weighed heavily on benchmark prices.
In August, however, production outages cut Libyan supply and propped up prices. In that month, Libya pumped 890,000 bpd, according to OPEC’s secondary sources, down from 1.003 million bpd in July. Nigeria, which said it would join the cuts once its daily output rate reached 1.8 million bpd, produced 1.86 million bpd, secondary source data suggested. However, Nigerian data pegged its daily production at 1.74 million bpd.
Iran was also treated preferentially in the original negotiations. OPEC agreed to let Iran raise its crude oil production by up to 90,000 bpd, Bloomberg recalls. In August, the country produced 3.828 million bpd, according to secondary sources. The data was in line with internal data, which gave a daily production rate of 3.845 million bpd.
Libya and Nigeria have collectively added about 550,000 bpd since the original deal was agreed to last year. That amount has offset about half of the output reduced by the rest of OPEC; the group agreed to cut production by 1.2 million bpd.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.