OPEC Oil-Output Deal with Libya an Empty Gesture?
Salma El Wardy and Grant Smith have written an article examining OPEC’s recent decision to impose an output cap of around 1 million barrels a day on Libya. The authors argue:
“OPEC appeared to score a diplomatic coup last week by persuading Libya, its most troubled member, to accept production limits. In reality, the agreement probably means little for the oil market.
The Organization of Petroleum Exporting Countries and its partners agreed on Nov. 30 to persevere with supply curbs until the end of next year, in a bid to drain oversupplied world markets. In a surprise addition, an output cap was imposed on members Libya and Nigeria, which had previously been spared any obligations while they struggled to recover barrels lost to armed conflict and sabotage.
The pact seemed to be a reversal for Libya, whose top oil official, Mustafa Sanalla, had outlined the country’s aspirations to revive exports and its need for leniency while nation rebuilding took place.
Yet in practice, the production cap of about 1 MMbopd imposes little constraint on Tripoli, which is barely able to push output any higher, consultants Eurasia Group and Wood Mackenzie say. Libya plans to abide by the target next year, according to a person familiar with the matter who asked not to be named because the information isn’t public.”
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