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Kuwati’s OPEC governor, Haitham Al-Ghais, said on Friday that it was not yet time to curb crude oil production in Libya and Nigeria—the two OPEC members with the largest production increases over the last two months.
The reason for OPEC’s unwillingness to pull the trigger on a cap for its two African members, according to Al-Ghais, is that both countries need to stabilize further.
Both countries have seen a significant increase in oil production in May and June.
For the month of May, Libya accounted for OPEC’s sharpest increase for the month, producing an average of 178,200 barrels per day more than April 2017. Nigeria accounted for the second largest monthly increase, producing an average of 174,200 barrels per day more in May.
In June, Libya and Nigeria once again saw the largest increases in oil production, with Libya producing 127,000 barrels per day more in June than in May, and Nigeria producing 96,700 barrels per day more on a month over month basis.
Even if OPEC were to cap both Nigeria and Libya at their current output levels, it is unclear what effect this would have on OPEC’s market rebalancing efforts, which some analysts say hasn’t even started yet.
Combined, Libya and Nigeria have increased output from 2.048 million bpd in April to 2.585 million bpd in June, and a cap would merely hold steady these levels of production, and would still take away from OPEC/NOPEC production quotas that promised to cut production by 1.8 million bpd.
While Kuwait said OPEC is not yet ready to assign cuts to Libya and Nigeria, it did say, according to Bloomberg, that they may be asked to join in limiting production. OPEC members have invited the two producers to the July 24 meeting in St. Petersburg to discuss the stability of their production. If Libya and Nigeria agree to limit production, it would at least remove two major sources of increasing supply from the market, making OPEC’s goal of rebalancing the oil market more achievable.
By Julianne Geiger for Oilprice.com
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Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.