EMEA News
OPEC Members Do About Face and Seek to Boost Production While UAE Ponders Cutback Exit Strategy
If reports on Tuesday are accurate, it took slightly less than two weeks for members of the Organization of the Petroleum Exporting Countries (OPEC) to shift from being agreeable to the newly-ratified crude cutback extension to indicating they intend to conduct business as usual: Iraq, Libya, and Nigeria are either in the process of boosting production or planning to in 2018.
And to further mitigate any positive effect the cutback extension would have on global supply and demand balance, the Energy Information Agency on Tuesday raised its U.S. crude production forecast in 2018 to the highest on record, to a daily boost of 780,000 barrels for a grand total of 10.02 million barrels per day (bpd).
In Iraq, Jabar al-Luaibi, that country's oil minister, stated that a new processing unit to the Kirkuk oil refinery will increase the plant's capacity to 56,000 bpd; he said this is in order to meet the domestic needs of the northern city of Kirkuk and nearby provinces.
Far more strident are the actions of Libya and Nigeria: the head of Libya's U.N.-backed government over the weekend reportedly met the head of Libya's National Oil Corp and the governor of Tripoli's central bank to discuss how the corporation could get more cash to raise oil output next year.
Meanwhile, France's Total stated that its new Egina field offshore Nigeria was ready to start in the New Year, which will add 10 percent to the country's production; the Nigerian petroleum ministry didn't comment on whether production elsewhere would be curtailed to compensate.
Two sources familiar with the matter told Reuters that contrary to media reports and insinuations from OPEC during its November 30 meeting to extend the production cuts, Libya and Nigeria "merely provided their production outlook for 2018 and an assessment that the combined total would not exceed 2.8 million bpd, their forecast output for 2017" - and that outlook was dependent on both countries' finances and security situation.
As if to cast a further pall on the proceedings, Suhail bin Mohammed al-Mazroui, energy minister for the United Arab Emirates, told media that OPEC and non-OPEC producers will announce an exit strategy from the output cutbacks in June, but he stressed "That does not mean we will exit in June; that means we will come up with a strategy."
He added, "Hopefully the market will be in a much better position for us to come and announce an exit strategy."
For his part, Essam al-Marzouq, oil minister for Kuwait, declared that producers would study an exit strategy before June: "I think the deal has been working perfectly; we are very optimistic about the growth next year, both the growth on the world economy and the growth in demand."
While these disclosures would presumably disappoint the many analysts who took OPEC at face value when it stated that everyone would pitch in this time out to reduce production, it's worth noting the one nation that has consistently stayed true to its word is the U.S., which in its quest for energy independence may soon reap the rewards of new drilling rights in Atlantic waters being developed by president Donald Trump's administration.
Oil companies are also lobbying Washington to sell drilling rights in Arctic waters north of Alaska and in the eastern Gulf of Mexico, where law prevents new oil leasing through 2022.
While the analytical community overall expressed its enthusiasm for OPEC's cutback extension agreement, a few sober-minded experts maintained focus on the logistic problems accompanying the extension: chief among them was Tom Kloza, founder of the Oil Price Information Service, who said "OPEC basically gave a Christmas gift to U.S. shale producers" because the cuts would enable the Americans to make further inroads in world markets.
