OPEC Deal In Jeopardy As Libyan Oil Output Nears 1 Million Bpd

Catogory : Announcements

libya—whose production has been hampered by civil unrest, political divides, and oil export terminals blockades over the past few years—is now targeting to further increase its oil output. Its most immediate goal is to reach 1 million bpd of production by the end of July, which would further complicate OPEC’s desperate efforts to reduce global inventories and prop up oil prices. And its ambitions seem plausible.

Just last month, when OPEC was discussing rolling over the output reduction deal, production-cut-exempt Libya hit its highest daily production level since 2014. Earlier this week, OPEC reported that total cartel production in May was actually higher than in April, with Libya the biggest single contributor to that increase.

Analysts warn, however, that Libya’s output increase is not a for-sure thing. Production could sharply drop again, given the political rivalry between factions and the fragile security situation in country.

Both scenarios—that Libya could increase production to 1 million bpd, or Libya’s unrest could cause a drop in production—are possible. For this reason, Libya’s production over the next few months is one of the wildest wild cards for OPEC and global oil supply.

Libya’s National Oil Corporation (NOC) said this week that it had reached an interim deal with Germany’s Wintershall to immediately resume production in concession areas and related fields, which would unblock 160,000 bpd worth of production that has been shut-in for most of the past two years over a dispute between the companies.

“Total oil production in Libya as of today is 830,000 b/d, and we are targeting one million barrels by end of July, 2017 as a result of the resumption of production from the Wintershall and linked Abouatiffel fields, as well as from 103 A and Nafoora,” NOC chairman Mustafa Sanalla said in the company statement on June 13.

Libya’s ambitions are not limited to lifting output to 1 million bpd by the end of next month, thanks to the interim deal with Wintershall. It targets even higher production by the end of this year.