It’s been a hard couple of years for petrostates, and 2017 isn’t looking any kinder. A glut of crude sent oil prices crashing, and though they’ve rebounded from a nadir below $30 per barrel back above $50 in recent months, the petrostate plan to right the ship—a production cut organized by OPEC and eleven other countries for the first six months of the year—hasn’t produced the intended results. Now, as that collection of oil-reliant regimes prepare to negotiate an extension to those cuts, Libya is doing the one thing no one in the cartel wants to see right now: it’s adding production. Bloomberg reports:
The North African country’s production has reached 796,000 barrels a day, Mustafa Sanalla, the chairman of state producer National Oil Corp., said Monday in a statement. Libya was producing about 700,000 barrels a day at the end of April, Jadalla Alaokali, an NOC board member, said at the time.
A revival in Libyan output adds to the challenge that the Organization of Petroleum Exporting Countries and other major producers face after agreeing last year to pump less crude to stem a glut and shore up prices…Libya and Nigeria were exempted from OPEC’s cuts because both countries continue to suffer production losses from militant attacks and political instability.
Libya’s production is a real unknown—it’s been up, then down, and now back up again. There’s still plenty of room for output to increase, because its current level of just under 800,000 barrels per day (bpd) is roughly half of what the country was producing before the 2011 uprising.
The petrostate cut amounts to just under 1.8 million bpd, so Libya’s resurgence is, in that context, important. It makes the task of eating away at the oversupply that precipitated the bearish crude market that much harder. But the real enemy of this plan is the United States, whose oil output is once again rising as the shale industry takes advantage of the slight uptick in prices and the ceded market share. This all adds up to a major headache for the countries trying to extend cuts in Vienna later this month.