The Organization of Petroleum Exporting Countries was anticipating a revival in production from the three when it set a targeted output range from 32.5 million to 33 million barrels a day under its November agreement, Barkindo told Bloomberg Television on Wednesday at a conference in Istanbul. Nigeria will support a cap on its production, the country’s oil minister Emmanuel Kachikwu told reporters Wednesday in Abuja.
“What we would like to see is an orderly recovery that would not disrupt significantly the rebalancing of the market, which is a very delicate process which has taken longer than expected because of the change in fundamentals,” Barkindo said. By setting a range for the production ceiling, OPEC was “making provisions for the expected recovery of production” from Libya, Nigeria and Iran, he said.
OPEC decided in November to reduce its output by 1.2 million barrels a day to 32.5 million starting Jan. 1 to clear a global glut. Other producers including Russia joined the deal, which was extended through March 2018.
Libya and Nigeria were both exempted from the cuts due to their internal strife, while Iran was allowed to raise production by 90,000 barrels a day as it was recovering from sanctions. Crude slid into a bear market last month amid concerns that cutbacks by OPEC and allied producers are being partially offset by a rebound in supply from Libya and Nigeria and by U.S. shale output. Brent crude, an international benchmark, has dropped 16 percent this year and rose 22 cents to $47.74 a barrel Wednesday.
OPEC pumped 32.6 million barrels a day in June, and its output exceeded demand in the first half of this year, according to a report the group issued Wednesday.
Libya and Nigeria may be asked to cap their output soon in an effort to help rebalance the market, Kuwaiti Oil Minister Issam Almarzooq said Monday at the Istanbul event. Both African nations are expected to send representatives to the next meeting of the OPEC and non-OPEC Joint Technical Committee on July 22 in Russia, Barkindo said.
OPEC recognizes that Libya, Nigeria, and Iran have faced “severe challenges,” and it welcomes their increased production, he said. “We are glad these countries are recovering fast.”
Nigeria’s output limit would come into play when the nation can stably pump 1.8 million barrels a day, about 100,000 more than its currently producing, Kachikwu said. “We still are below the 1.8 million barrel a day benchmark set for us by OPEC. I think that over the next one or two months, hopefully, we can get to that point where we can say the recovery has been tested, it is systemic and predictable."
Nigeria will miss the meeting in Russia later this month, but Kachikwu plans to meet with Saudi Arabia and Russia after that.
Libya’s output has risen to 1.05 million barrels a day, or 45,000 barrels a day more than the country was pumping at the beginning of July, according to person with direct knowledge of the matter who asked not to be identified for lack of authorization to speak to the media. The nation’s output is at the highest level since June 2013, according to data compiled by Bloomberg.
The global cuts accord between OPEC and non-OPEC producers faced “headwinds” in the first quarter this year and didn’t cause crude stockpiles to decline fast enough, Barkindo said. The current market downturn is lasting longer than previous slumps, due largely to 700,000 to 800,000 barrels a day of additional supply from the U.S., he said.
Supply and demand now “show us we are on the right course” to achieving OPEC’s goal of reducing stockpiles to their five-year average, he said.
Shale producers “need to join us so that together we can restore stability and maintain it,” Barkindo said. “The global economy itself benefits from stable oil markets.”