The crude oil trade remains heavily speculative as traders crowd the long side in anticipation of an agreement between Moscow in Riyadh. This morning, however, prices have turned lower as Iraq is seeking an exemption from the Opec deal citing military spending needs.
Article / 16 September 2016 at 12:30 GMT

Nigerian, Libyan export boost about to add to Opec's worries

Head of Commodity Strategy / Saxo Bank
  • Both Libya and Nigeria hope to boost oil export in the near future
  • The added supply would add to an existing crude oversupply headache
  • Opec and the IEA warn that crude markets could be out of balance until late 2017
  • Markets will take a wait and see approach until the supply situation is clearer
By Ole Hansen

Crude oil's losses this week extended towards the September lows on news that both Libya and Nigeria will attempt to increase exports during the coming weeks. If successful, this will add to the current overhang of supply which was already expected to last deep into 2017. 

Libya will – once again – attempt to open up for oil exports from its eastern ports of Ras Lanuf, Es Sider and Zueitina. Supplies from these ports could potentially unlock crude supplies of 300,000 barrels per day. Meanwhile in Nigeria, Exxon Mobil Corp. has said it is ready to resume shipments of up towards 340,000 b/d and Royal Dutch Shell another 200,000 b/d.


Oil executives and officials heading to Algiers later this month for the IEA forum will have plenty to talk about, given added fears of a heightened oil supply glut. Photo: iStock

A resumption of these supplies could add more than 800,000 b/d into a market already struggling to bring down a persistent overhang of supply. Before these latest developments both Opec and the International Energy Agency in monthly reports earlier this week warned that the markets would potentially not reach a balanced situation before late 2017.

The combined oil production from Nigeria and Libya hit 1.8 million barrels per day (bpd) in August, almost half of what the two countries, not least Libya, produced back in 2013. 

Libya and Nigeria oil production

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With these extra barrels potentially hitting the market, the pressure on prices and the need for other producers to cut production may continue to weigh on prices. This at a time of year where crude oil prices from a seasonal perspective tend to trade lower. 

Libya is probably the most interesting case, considering how production has been decimated in recent years, due to domestic conflict. Despite the emerging supply glut since 2014, this has left room for the return of Iranian oil following the lifting of sanctions and increased production from countries such as Russia, Saudi Arabia and Iraq.

Libya has made more than a dozen failed attempts to increase exports in recent years according to Bloomberg. Until we have a clearer picture of whether this attempt will be more successful than previous ones, the market is likely to adopt a wait and see approach. 

In a week where non-Opec production continued to show resilience and where the supply glut was forecast to extend deep into 2017, the upcoming meeting of the International Energy Forum in Algiers from September 26 to 28 is likely to attract some increased attention. 

– Edited by Robert Ryan

Ole Hansen is the head of commodity trading at Saxo Bank.

16 September
AndrejLences AndrejLences
Again, interesting article. On Algiers meeting, in my view OPEC members probably won't cut, in the case they won't ,is it possible for Russia to cut output ALONE, what's your opinion about that Ole ? As they are hit economically quite a lot. Thank you for your response.
16 September
AndrejLences AndrejLences
And if there won't be a rate hike in the US can oil go back to 47 after 21th ?


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