Nigeria and Libya have received a soft landing from the Organization of Petroleum Exporting Countries (OPEC) over both countries’ current overproduction that has seen market concerns as oil prices dropped lower early Thursday.
The organisation is maintaining a strict implementation of an agreed production cuts, but has failed to state when cuts would be applicable to both countries.
Mohammad Barkindo, OPEC Secretary-General, while responding to questions at an economic forum in St Petersburg, Russia Thursday June 1, 2017 reiterated the outcome of the Vienna meeting which extended cuts for another nine months.
“Too early to say when production caps could be imposed on Libya and Nigeria, they have a lot of issues to solve,” he was reported as saying.
On oil price decline, Barkindo said “we have no issues with people taking positions in the market, we are focusing on fundamentals.”
The oil exporting countries had on May 25, 2017 extended their current production limit by nine months as against one year that was initially rumoured.
The members of OPEC and 11 other oil producers led by Russia have been pumping 1.8 million fewer barrels per day (bpd) than last year since January, in a rare alliance designed to bolster prices.
“As far as OPEC is concerned, keeping the level of the cut for another nine months will help to balance the market,” said Jabbar Ali Hussein al-Luiebi, the Iraqi oil minister.
However, Nigeria and Libya were exempted from the limits agreed at the Algiers Accord last year, which came into effect January 1, 2017. But other exporting countries are miffed that the production levels by both countries are causing a glut thereby lowering prices and had wanted both countries to be given limits or at best lift the limits.
But last week, OPEC upheld and extended the limits for nine months, excluding Nigeria and Libya, whom it claimed are having contending issues.
“We don’t want to put a burden on countries that cannot afford longer cuts,” Kuwaiti Oil Minister Issam Almarzooq said, in response to the nine months extension instead of the 12 months initially planned.
The Algiers Accord and 171st Ministerial Conference specifically reduced OPEC member production by around 1.2 mb/d to bring its ceiling to 32.5 mb/d, effective 1st of January 2017. The duration of the agreement was six months, extendable for another six months to take into account prevailing market conditions and prospects. Equally key non-OPEC countries, including the Russian Federation were made to agree on a reduction of 600 tb/d production.
Russia, according to Dmitry Medvedev, its prime minister, is fully committed to complying with output cuts.
Before the production cut was decided late last year, OPEC had been flooding the market with oil in the hope of hurting US producers by lowering global prices. North American production methods relied on higher prices because they are costlier than those used in OPEC countries.
However, the fracking method used to extract oil from rocks in the US has recently become more efficient and therefore less vulnerable to low prices.
By Business a.m. live staff