Crude Creeps up as Libya and Nigeria Announce Output Increases

Nigeria is exempt from the recent OPEC oil deal

With the January 1 implementation of the Organization of the Petroleum Exporting Countries' (OPEC) oil cutback plan only days away, sources in Libya and Nigeria, which are exempt from the deal, report rising output – in Libya's case, to 622,000 barrels per day (bpd).

Libyan output is up slightly from prior to a two year blockade of major western pipelines being lifted, according to the National Oil Corporation.

Meanwhile, Muhammadu Buhari, president of Nigeria, earlier this month stated he intends to boost his country's production to 2.2 million bpd.

This of course is in addition to many other OPEC members and non-members who are planning to pump away regardless of how earnest the cartel may be in wanting to alleviate the global glut: even though the amount is less than originally intended, Russian producer Gazprom Neft said this week it will increase production by 4.5-5 per cent in 2017.

But the news of what rogue players intend to do didn't negatively impact trading on Tuesday: oil continued its rally with a 1.7 percent increase, as Brent climbed 87 cents to settle at $56.03 and West Texas Intermediate settled up 88 cents to $53.90.

Tuesday's showing caused Phil Flynn, analyst at Price Futures Group, to remark, "Some of the doubts (in OPEC) people are showing are going to have to be put to rest; there's a strong possibility that we're going to rally into the end of the year."

Still, many other analysts think the rally may stall until it becomes more obvious that the OPEC cutbacks, regardless of the activities of non-participating players, will actually proceed as agreed to: Olivier Jakob, oil analyst at Petromatrix, said, "To go above $60 is going to be difficult; we're already close to the top rather than the bottom of the range right now.

"From January, we'll start to have a better idea about the level of OPEC production. That is going to be more and more of a focus."

To that end, sources told Reuters that the first meeting of a committee of OPEC members and non members to monitor compliance has been tentatively set for January 13, with Kuwait, Algeria, Venezuela, Russia, and Oman named as among the commission participants.

For the record, Wood Mackenzie thinks $55 per barrel is an ideal price both for companies to become cash flow positive in the New Year, and to prevent U.S. shale's further recovery, which in turn could compel OPEC and non-member countries to abandon their cutback efforts.