As oil producers are looking for ways to control rising oil production to help ease oil price fluctuations, in a meeting to be held later this month, Libyan and Nigerian officials may join a combined meeting between OPEC and non-OPEC nations.
Exemption from OPEC Deal
On December 1, 2016, the Ministry of Petroleum Resources announced the decision of the OPEC (Organization of Petroleum Exporting Countries) after strategic negotiations to exempt Nigeria from the oil output cut agreement. Another reason for the immunity is that OPEC is also worried about having incidences of vandalisation on petroleum installations in the country.
Nigeria was accommodated due to issues on its gas facilities being damaged by militant attacks previously.
Minister of State for Petroleum Resources Mr. Ibe Kachikwu said in a statement back then, “The concession was given as the country has been through production challenges recently due to the vandalisation of oil and gas infrastructure which has negatively affected the country’s ability to produce oil optimally in the recent past.”
The statement also remarked that considerations are offered to not only Nigeria but also Iran and Libya and that would mean that for 2017, other member countries would seek to cut output and these countries are expected to increase in production.
However, it was observed that both countries have boosted production which puts a heavy weight on prices worldwide and this triggered the purpose of including them in the talks. Russian Energy Minister Alexander Novak told reporters, “We have spoken to Barkindo (OPEC Secretary General Mohammad Barkindo) and in the next two weeks there will be conversations with them (Libya and Nigeria) and possibly we will invite them to the technical summit.”
Meeting of OPEC and Non-OPEC Nations
On July 24, six ministers from OPEC and non-OPEC nations will meet in St. Petersburg, Russia. Kuwait, Venezuela, Saudia Arabia, Russia, Algeria and Oman will discuss current oil market situation.
However, the Oil Minister of Nigeria, Ibe Kachikwu, expressed unavailability to attend the meeting due to another commitment. Yet, a technical committee holding talks to include Nigerian and Libyan representatives and talk about production plans before the ministers will have their formal discussions. Nonetheless, the Libyan government has not received any invitation yet to attend the meeting in Russia.
Still, OPEC delegates believe that bringing the two countries or one of them into the discussion would at least result to being able to ask these to cap their output.
Reduce Global Oil Glut
Analysts are saying that Nigeria and Libya “may be open to some form of limits if the right financial incentive can be found.” The output-cut agreement has shielded the market to 1.8 million barrels a day.
However, asking the two countries to follow the oil cap does not guarantee that it will reduce the current oil glut worldwide. Nonetheless, an energy analyst at SCI International, Gao Jian, stated that “Talks of imposing a cap has boosted market sentiment, by the rally will die soon because there is no clarity on how OPEC plans to deal with them.”
In totality, oil futures are starting to bounce back on Tuesday as the two countries may soon face production caps. The market is optimistic that sooner or later global supply growth will start to slow down after limiting the two African producers.
It is true that optimism may spark the oil market as there would be a concrete implementation of control that can help cut the global output which can help support oil prices. Furthermore, the market believes that prices are headed for a rebound in this year’s second half.