Libya is already calling for an exemption to any output curbs. File Image / Pixabay
If crude prices on Tuesday resuming their downward spiral wasn't indication enough, a host of observers say the Organization of the Petroleum Exporting Countries (OPEC) and allies will likely agree to cut output when it convenes in Vienna next month; but the question of whether the cartel's efforts will be effective remains more salient than ever, thanks to countries such as Libya.
Ahmed al-Kaabi, the United Arab Emirates' governor for OPEC, said on Tuesday that the cartel will very likely reduce production, and he added that the JMMC technical committee at OPEC was still studying markets and will share final conclusions before the December meeting.
He also told the Al Bayan newspaper that the UAE is committed to any OPEC decision.
Mustafa Sanalla, chairman, National Oil Corporation
Libya has withheld more than any other country from the global market
Legendary trader Andy Hall shares this view, and he also told Bloomberg that "When you know you've got prices in 2020 and beyond for West Texas Intermediate down below $60 a barrel, almost down to the mid-$50s further along the curve, I think that is essentially at the bottom."
But inherent in such remarks is the assumption that OPEC can deliver the goods effectively and efficiently, and as history ably demonstrates, almost all of the cartel's initiatives have been marked by in-fighting and undermining: the latest sign that something could go wrong with OPEC's proposal to slash production is Libya, which Mustafa Sanalla, chairman of the country's National Oil Corporation, says is hoping for an exemption to any downsizing.
He told media, "The OPEC community has understood the difficulties we face - Libya has withheld more than any other country from the global market; this should be factored in."
He noted that Libya's output has skyrocketed in the latter half of the year to its highest level in more than five years, reaching 1.28 million barrels per day (bpd); this is more than double its June production of 500,000 bpd.
Moreover, Sanalla in October said the country is targeting an increase to 1.6 million bpd.
As for the long term, don't expect any slowdown in production, according to Eurasia Group, which stated in a research note that "Long-term oil production will likely continue to rise as a political agreement would facilitate more investment in oil fields."
Perhaps most importantly, oil powerhouses outside of OPEC have repeatedly expressed their reluctance to curb their production plans, case in point: Russia, whose energy minister, Alexander Novak, last week said that no emergency action is warranted to stem a decline in oil prices and that "it's not right for market participants to react to any one-off fluctuations."