Oil in Global Economy Series: Will Libya and Nigeria join OPEC deal?

When the OPEC deal was first struck in last November, two countries, Libya and Nigeria were granted exemption from the deal. There are some speculations running in the market that these two countries might be called upon to join the OPEC initiative to downsize supplies in the global market. The Iraqi oil minister confirmed the speculation just days ago by suggesting that these two countries might be asked to join the initiative. When the nations last discussed the deal, Libyan output remained seriously curtailed due to several years of post-Gaddafi infighting. Similarly, militant groups in the Niger Delta attacked Nigeria oil facilities to the point that production fell to roughly half of its former levels at times. However, in recent times, the production from these two countries have increased significantly.

But, how likely it is that these two countries will join the OPEC initiative?

We do not think it as a very likely scenario, especially for Libya. It might join the output cuts to ensure a ceiling on the production but that ceiling is likely to remain at quite a high and would be insignificant even in the medium term.

OPEC data suggests that output in Libya reached the highest level since 2014. In the first quarter, production averaged 681,000 barrels per day but it is small compared to Libya’s pre-civil war output of 1.5 million barrels per day.

While Nigeria is more likely to join the initiative, the oil production there, which averaged 1.57 million barrels per day in the first quarter is still below its pre-delta militant level of 2.4 million barrels per day.