Indications have emerged that Libya and Nigeria, both oil producing nations exempted from production cut agreement reached by the Organisation of Petroleum Exporting Countries, OPEC, may be asked to cap their crude output soon.
Kuwait Oil Minister, Issam Almarzooq, said the decision would be in an effort to help rebalance the oil market.
Bloomberg reports that OPEC and non-OPEC producers have invited the two African nations to their committee meeting in St. Petersburg, Russia, on July 24, to discuss the stability of their production.
Mr. Almarzooq, who is the chairman of the committee monitoring the compliance of OPEC and non-OPEC suppliers with output cuts that started in January, confirmed this in an interview with the news agency in Istanbul.
“We invited them to discuss the situation of their production,” he said.
“If they are able to stabilise their production at current levels, we will ask them to cap as soon as possible. We don’t need to wait until the November meeting to do that,” he said, referring to the upcoming OPEC meeting scheduled for November 30.
Crude sank into a bear territory last month amid concerns the cutbacks by producers of the Organization of Petroleum Exporting Countries, Russia and other allies are being partially offset by a rebound in supply by Libya, Nigeria and U.S. shale output.
Nigeria, like Libya, was exempt from the cuts due to agitations by militants in its oil rich Niger Delta region.
Productions have, however, improved following negotiations with leaders from the region.
Libya’s oil output has climbed to more than 1 million barrels a day for the first time in four years, while Nigeria’s production rose 50,000 barrels a day in June, according to a Bloomberg survey.
Abdulsamad Al-Awadhi, a London-based analyst and Kuwait’s former representative to OPEC, said capping Libya and Nigeria might help but won’t cut the supply by much.
“OPEC needs to have better compliance, and it must respect the right of Libya and Nigeria to go back to the market,” he argued.
“Other countries that raised output while Libya and Nigeria are out should do more and give space to these two countries to go back to the market.”
Mr. Almarzooq, on his part, said he sees the oil market moving in the right direction.
Growth in the number of operational oil rigs has started to slow, and crude inventories are declining, he said.
The decision to grant Libya and Nigeria exemptions to production cuts was a collective decision, and any proposal to include them in OPEC’s plans will also require a joint decision, Secretary General Mohammed Barkindo told reporters at the event in Istanbul.
He said it is still too early to discuss steeper cuts by the group and its allies.
The OPEC/non-OPEC ministerial monitoring committee will discuss the impact of the output curbs on the market at the July 24 meeting, Mr. Almarzooq said, adding that deepening the reductions under the current agreement is not on the agenda.
“It is too early to discuss deeper output cuts by OPEC/non-OPEC producers participating in the agreement to curb production,” he said.
“We just finished the meeting in May and we need to give it more time,” he added.