As Nigeria’s oil output gradually climbs to its quota as set by the Organisation of Petroleum Exporting Countries (OPEC), Saudi Arabia, leader of the cartel said on Monday it would monitor rising production output by Africa’s largest economy, as well as Libya, two countries exempted from the output cut agreed upon last November as part of measures to enhance oil price at the international market.
Both OPEC states- Libya and Nigeria, were exempted to help them recover from years of unrest that affected production levels in the two countries.
Reuters quoted OPEC sources as saying on Saturday that Nigeria could cap output if it managed to sustain production at 1.8m bpd for 90 days, while Libya is struggling to sustain output at above 1 million bpd, well below its 1.4m bpd capacity and hence a cap was not needed.
The two have now increased their output by about 700,000 to 800,000 bpd since the OPEC-led pact was agreed, with Nigeria’s national production expected to touch 2.2m bpd last month according to some major operators in the industry.
Monitoring output more closely at this time, the oil rich kingdom said, would help the cartel quickly address weak compliance with output cuts by some OPEC member states after the agreement that included several non-members led by Russia to reduce oil output by a total of 1.8m bpd from January 2017 until the end of March.
The deal to curb output propelled crude prices above $58 a barrel in January but they have since slipped back to a $45 to $50 range as the effort to drain global inventories has taken longer than expected.
Rising output from U.S. shale producers has offset the impact of the output curbs, as has climbing production from Libya and Nigeria.
“We must acknowledge that the market has turned bearish with several key factors driving these sentiments,” Saudi Energy Minister Khalid al-Falih told a meeting of a committee that monitors the deal between OPEC and non-OPEC states.
Alongside Saudi Arabia, the committee known as the JMMC includes Russia, Kuwait, Venezuela, Algeria and Oman. It has the power to recommend measures to other producers involved in the pact, depending on market conditions.
JMMC is due to announce its position later on Monday.
Falih said that weaker compliance with cuts by some OPEC members and a rise in OPEC exports were helping soften prices.
Saudi Arabia and Kuwait have cut more than they pledged but others, such as the United Arab Emirates and Iraq, have shown relatively weak adherence to the limits.
“Although conformity with the production agreement remains … at high levels, some countries continue to lag which is a concern we must address head on,” Falih said.
“Exports have now become the key matrix to financial markets and we need to find a way to reconcile credible exports data with production data,” he added.
Russia’s energy minister Alexander Novak said on Sunday that Libya and Nigeria were approaching the moment when their output should be capped due to significant rises in recent months.
Falih said the issue of rising Libyan and Nigerian output would be addressed in the context of global supply and demand patterns, adding that demand was expected to grow by about 1.4 million to 1.6 million bpd next year, similar to 2017 and so should more than offset rising U.S. output.
OPEC Secretary General Mohammad Barkindo said market rebalancing would accelerate as demand would pick up in the second half of the year.
Russia and Saudi Arabia face mounting pressure to prop up oil prices. Russia, which is heavily reliant on oil revenues, is holding a presidential election next year.
Saudi Arabia needs higher prices as it wants to list its state giant oil firm Saudi Aramco next year. It has also faced several years of record budget deficits.