The increasing production in the United States remains as one of the biggest hindrances to oil price recovery, however, an increased production within the OPEC, thanks to Libya and Nigeria also played its part in the recent decline in oil prices. The latest OPEC monthly report showed that the oil output in Libya, which has been exempted from the OPEC deal produced 0.73 million barrels per day. The level of output is more than double the average production rate of 2016, which was 0.39 million barrels per day. Moreover, the May production rate was 32 percent more than the production in April.

Libya, where production was hampered by the civil war, political divides, and oil terminal blockades will now increase production further to reach 1 million barrels per day by the end of next month. According to OPEC’s monthly oil market report, production increased by 336,000 barrels per day within the OPEC and the single largest increment came from Libya and it continues to undermine the OPEC efforts that aim to reduce global oil supply by 1.76 million barrels per day. Libya’s National Oil Corporation (NOC) said this week that it had reached an interim deal with Germany’s Wintershall to immediately resume production in concession areas and related fields, which would unblock 160,000 barrels per day worth of production that has been shut-in for most of the past two years over a dispute between the companies. NOC said last month that it has a plan for three development phases to lift Libya’s oil production. The first stage plans for increasing output to 1.32 million barrels per day by the end of this year, at a cost of US$550 million. The second phase entails raising output gradually to 1.5 million barrels per day by the end of next year, for another US$1.8 billion worth of investment, plus additional US$1.2 billion in tank and pipeline replacement and maintenance. In the third development stage, Libya plans its production to increase to 2.2 million barrels per day by 2023, which would require around US$18 billion in investments.

However, the risk of further civil turmoil can’t be ruled out that could see production declining over the coming months. We would be closely monitoring production developments in Libya as it would be a major influencing factor the oil price. WTI is currently trading at $44.6 per barrel and Brent at $2.6 per barrel premium to WTI.