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Libya has insisted that it remains exempt from the oil output reduction deal that OPEC today decided to extend by another nine months, to March 2018. According to Libya’s ambassador to Austria, who represented the country at the cartel’s meeting, it is still producing less than half of its “original production quota.”
Libya, along with Nigeria and Iran, was exempted from the original agreement, struck in November 2016, as its oil production was affected by factors other than the global glut that sank prices in 2014.
According to Platts, OPEC sources had indicated that Libya will be granted its exemption in the extended deal, as militant activity and general political instability have caused its oil output to fluctuate considerably. Just a month ago, Libya’s daily average slumped to 492,000 as militant groups blocked pipelines carrying oil from the country’s largest oil field, Sharara, and from the El Feel field to the Zawiya export terminal.
In May, however, production recovered to almost 800,000 bpd. The National Oil Corporation has plans to raise this to over a million barrels daily by the end of this year. However, an exemption would automatically undermine OPEC’s effort to push up prices by extending the cut agreement.
The success of the extension is already questionable: Brent crude and WTI actually fell after the announcement from Vienna, as traders were disappointed by the fact that the extent of the cut remained unchanged. It has become evident that despite commendable compliance rates, OPEC was largely expected to cut deeper.
Yet, as Saudi Arabia’s Khalid al-Falih told media after the announcement, the deeper-cuts option was on the table, along with the possibility of a six-month extension, but the nine-month option with quotas left as they are now came to be seen as the “safe bet.”
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.