The resilience of a deal among global producers to cut oil production and ease a worldwide surplus is already being tested as Libya and Nigeria prepare to sell hundreds of thousands of barrels on to the market.
Protesters blockading pipelines to Libya’s Sharara and El Feel oilfields have promised to reopen them, meaning production could restart within days, according to advisers of the Government of National Accord in Tripoli. This comes as crude listings out of the port of Es Sider are slowly restarting.
“We need to maintain some wait-and-see attitude towards Libya but this potential development cannot be ignored,” said Olivier Jakob, at energy consultancy Petromatrix.
A jump in Libya’s output by 400,000 barrels a day risks releasing more crude on to the market, threatening an oil price rally spurred by an agreement between Opec and countries outside of the cartel to curb global supply.
On Thursday, Ashraf al-Nakou, an adviser to the Tripoli government confirmed that El Feel operated by Italian oil major Eni has reopened, adding 80,000b/d of production. He added that the pipeline carrying the oil to the coast had also started operating.
Brent crude, the global benchmark, was up 26 cents to $54.16 a barrel at midday in London on Thursday after reaching $57.89 on Monday — the highest since mid-2015, and up almost 20 per cent since Opec’s November 30 agreement.
Libya, which was exempt from Opec’s share of planned cuts because of its internal conflict, has doubled its production since September to 600,000b/d.
But output is still about half the level the country pumped before a 2011 uprising as rival governments in the country’s east and west together with armed factions compete for power and the wealth from Libya’s oil riches.
Opec had targeted production at about 32.5m b/d from early next year as producer countries grapple with a two-year downturn in crude prices that has hit their economies.
However resurgent output from both Libya and Nigeria, which Opec agreed to exempt from the cuts, may take the cartel’s output substantially higher and risks non-compliance from producers outside of Opec, say analysts.
“Further growth from these two countries might well stand in the way of global oil inventories falling in 2017,” said Tamas Varga at London-based broker PVM.
Nigeria’s oil production is close to 1.8m b/d, oil minister Emmanuel Ibe Kachikwu said on Thursday. Militant attacks to energy infrastructure in the Niger Delta oil hub have caused disruptions to production for much of this year and output has fallen from a peak of 2.2m b/d.
Nigeria on Thursday signed a deal with international oil companies ExxonMobil, Royal Dutch Shell, Eni and Chevron for owed payments of more than $5bn from joint venture projects. The west African producer’s debts to oil majors have held back investment into future output.
Mr Kachikwu said the government sought a “lasting peace” in the resource-rich region to boost production, the mainstay of the country’s economy.
Opec, in its monthly oil market report, said on Wednesday it still does not expect supply and demand to move back into balance until the second half of next year, even if producers within the cartel and others such as Russia comply with cuts.
Get alerts on Oil when a new story is published