The Wildcard in OPEC’s Next Deal

Catogory : Market Report

When last week news broke that Libya’s UN-recognized government and the eastern government might just be willing to settle their differences and hold elections early next year, its significance for oil markets passed more or less unnoticed as everyone was watching OPEC and Iran.

Now, the head of Libya’s National Oil Corporation has suggested that this significance could turn out to be pretty major. Earlier this week, Mustafa Sanalla told that the NOC hoped Libya would be exempted from any new OPEC-wide production cuts that are under discussion by some OPEC members right now in response to the latest oil price decline.

“The OPEC community has understood the difficulties we face – Libya has withheld more than any other country from the global market,” Sanalla said.

While this may be an overstatement—after all, in terms of production withheld Libya has got nothing on Venezuela.

Libya has probably the largest reserves of crude oil on the continent and revenues from selling oil represent pretty much all of its export revenues.

Now, Libya is producing 1.5 million bpd and plans are to boost this to 2.2 million bpd production has been growing. OPEC’s intention to resume cutting comes at the wrong time for Libya.

If, this happens and Libya manages to hold elections without armed clashes, it would be stepping on the road to recovery, and recovery means higher oil production.