Published: Mon, July 17, 2017
Business | By Max Garcia

Kuwait: it's premature for OPEC to cap Libya, Nigeria oil output

Kuwait: it's premature for OPEC to cap Libya, Nigeria oil output

It could become the highest exporter of oil to the United Kingdom, which is higher than any of OPEC member, by 2020.

This has been bad news for the cartel's leading members, which includes Iran, Saudi Arabia and Venezuela, who have seen holes blown in their hydrocarbon-dependent budgets.

Meanwhile, on a longer term horizon, the focus has switched from when "peak oil" will be reached - the moment oil extraction starts to decline due to dwindling resources - to when demand itself could fall.

So the mood as top energy bosses and ministers met at the World Petroleum Congress in Istanbul last week ranged from pensive to sombre.

"There are some encouraging signs that things are getting better for crude, last weeks healthy stock draws in the USA and the rig count slowly but surely not increasing at the rates they were earlier on in the year, but fundamentally we are still in an oversupplied market", said Matt Stanley, fuel broker with Freight Investor Services (FIS).

The cuts were envisaged for six months and extended for another three.

Saudi Arabia, the rest of the Opec and Russian Federation are engaged in a global game of chicken with the 3,000-odd U.S. shale oil drillers, who can not collude on prices or output as it violates American law and whose bank loans make it imperative to maximise output even if market prices fall below the marginal cost per extra barrel.

Last week, oil prices jumped by as much as 5% after the markets saw signs of a recovering demand for the commodity along with a slight slowdown in the US oil production which has been an issue for the oil markets as it has dampened the OPEC's efforts in driving oil prices up and preventing a global oversupply.

"It will be a very, very hard six months for the oil industry, a case of riding out the storm", he said.

Opec secretary-general Mohammed Barkindo admitted there had been "high expectations" that markets would respond to the deal, but so far these had not been realised. An OPEC and non-OPEC committee meets in Russian Federation on July 24 to discuss the impact of the deal.

Meanwhile, an effort to tighten coordination, Barkindo revealed that OPEC had held "very useful preliminary meetings" with U.S. shale producers.

Global oil supplies rose by 720,000 barrels per day (bpd) in June across the world and by 340,000 bpd in OPEC countries, according to the report, driven not only by Libya and Nigeria but also countries subject to the cartel's cutback agreement.

He said, "What we would like to see is an orderly recovery that would not disrupt significantly the re-balancing of the market, which is a very delicate process that has taken longer than expected because of the change in fundamentals".

Adding to this, IEA upgraded its 2017 global oil demand growth forecast by 100,000 bpd to 1.4 mbpd.

We should not be surprised if we witness the arrival of U.S. gas to our country, if it is competing with other suppliers in the world including our gas-rich neighboring countries like Iraq, Iran and Qatar.

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