Source: OilPrice.com, by Gregory Brew
Despite some suggestions that oil prices will level off at around $60 in 2017, since the initial surge of the OPEC production deal prices have barely nudged above $53. Over the long-term, outlooks are more bearish than bullish, and a major reason for that is the strong likelihood of increased production in three places: Libya, Nigeria and Iran.
All three countries were effectively exempt from the OPEC production cuts, for various reasons. Iran has agreed to keep its production level below 4 million bpd, allowing it to add about 90,000 bpd to its production level. Nigeria has suffered significant cuts to production over the last year, chiefly due to the activities of militants in the Niger River Delta.
Libya has been torn apart by civil war and a fight between its recognized government and separatists in its eastern regions, with the country’s rich oil fields and refineries the major prize in frequent skirmishes.
Cuts from OPEC members totaling 1.5 million bpd, together with non-OPEC cuts of nearly 600,000 bpd, have already pushed prices above the their threshold in 2016 of $50, but there’s strong evidence that the initial market impact of the OPEC deal is on the verge of playing itself out. Over the next year, activity in these three countries could continue to exert downward pressure on prices.
That is, of course, if Libya is able to stay the course and succeed in bringing its oil industry back to full strength. While the immediate outlook for a strong recovery in Libyan production is good, the political situation in the country is uneasy and instability, in the form of renewed fighting between rival factions, could return to disrupt oil production.
Libya succeeded in bringing the bulk of its oil production and export capacity back on line in Fall 2016. Between September 2016 and January 2017, Libyan production climbed from 300,000 bpd to nearly 700,000 bpd, a three-year high according to the National Oil Company (NOC). The increase came after military forces succeeded in retaking key installations in the east of the country, where separatist sentiment is strongest.