Libya and Nigeria, which have both boosted oil production since they were exempt from global cuts this year, may be asked to cap their crude output soon in an effort to help re-balance the market, Kuwait Oil Minister Issam Almarzooq said.
OPEC and non-OPEC producers have invited the two African nations to their committee meeting in St. Petersburg, Russia, on July 24 to discuss the stability of their production, Almarzooq said on the sidelines of an energy conference in Istanbul. Almarzooq is chairman of the committee monitoring the compliance of OPEC and non-OPEC suppliers with output cuts that started in January and have been extended to March.
“We invited them to discuss the situation of their production,” Almarzooq said. “If they are able to stabilize their production at current levels, we will ask them to cap as soon as possible. We don’t need to wait until the November meeting to do that,” he said, referring to the upcoming OPEC meeting scheduled for Nov. 30.
Crude sank into bear territory last month amid concerns the cutbacks by producers of the Organization of Petroleum Exporting Countries, Russia and other allies are being partially offset by a rebound in supply by Libya, Nigeria and U.S. shale output. Libya and Nigeria were both exempt from the cuts due to their internal strife.
The two countries came into focus after they seemed to resolve some of the political challenges that had slashed their production. Libya’s oil output has climbed to more than 1 million barrels a day for the first time in four years. Nigeria’s production rose 50,000 barrels a day in June, according to a Bloomberg survey.
“Capping Libya and Nigeria might help but won’t cut the supply by much,” Abdulsamad Al-Awadhi, a London-based analyst and Kuwait’s former representative to OPEC, said Monday by phone. “OPEC needs to have better compliance, and it must respect the right of Libya and Nigeria to go back to the market. Other countries that raised output while Libya and Nigeria are out should do more and give space to these two countries to go back to the market.”
Kuwait’s Almarzooq said he sees the oil market moving in the right direction. Growth in the number of operational oil rigs has started to slow, and crude inventories are declining, he said. Benchmark Brent crude, which has fallen 17 percent this year, gained as much as 47 cents on Monday in London and was trading at $46.94 a barrel at 7:24 a.m. local time.
Output at older oil fields from China to North America — comprising a third of world supply — fell 5.7 percent last year, the most since 1992, according to Rystad Energy AS. It will drop about 6 percent in 2017 if oil stays at current prices, the consultant said. U.S. crude drillers increased the rig count last week by 7 to 763, Baker Hughes Inc. said Friday.
Giving Libya and Nigeria exemptions to production cuts was a collective decision, and any proposal to include them in OPEC’s plans will also require a joint decision, Secretary General Mohammed Barkindo told reporters at the event in Istanbul. He said it is still too early to discuss steeper cuts by the group and its allies.
The OPEC/non-OPEC ministerial monitoring committee will discuss the impact of the output curbs on the market at the July 24 meeting, Almarzooq said. Deepening the reductions under the current agreement is not on the agenda, he said.
“It is too early to discuss deeper output cuts by OPEC/non-OPEC producers participating in the agreement to curb production,” Almarzooq said. “We just finished the meeting in May and we need to give it more time.”