Libyan And Nigerian Production Rose, Rest-Of-OPEC Needs Bigger Cuts

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Summary

OPEC agreement places 32.5 ceiling.

Libya and Nigeria are exempt.

Their production rose 140,000 b/d in November.

New adjustments required by rest-of-OPEC now up to 1.470 mmbd, a 26% increase.

OPEC's new agreement states:

In the fulfilment of the implementation of the Algiers Accord, 171st Ministerial Conference has decided to reduce its production by around 1.2 mb/d to bring its ceiling to 32.5 mb/d, effective 1st of January 2017," as follows:

Agreement

MBD

Reference

Adjustment

January

Algeria

1,089

(50)

1,039

Angola

1,751

(78)

1,673

Ecuador

548

(26)

522

Gabon

202

(9)

193

Indonesia

Iran

3,975

90

3,797

Iraq

4,561

(210)

4,351

Kuwait

2,838

(131)

2,707

Libya

Nigeria

Qatar

648

(30)

618

Saudi Arabia

10,544

(486)

10,058

UAE

3,013

(139)

2,874

Venezuela

2,067

(95)

1,972

As I have explained, the table is flawed. I made suggestions of how to fix the Agreement in this article. The Adjustments add to 1.164 million barrels per day, but the January production number would be 165,000 b/d over the 32.5 ceiling. Therefore, OPEC needs 1.329 million barrels per day of cuts.

Today, both Reuters and Bloomberg reported that OPEC production rose to about 34.2 million barrels per day in November. This was the highest combined volumes in Reuters' history, going back to 1997. Indonesia has been de-listed as an OPEC member, but was included in these numbers.

Both Libya and Nigeria are exempted from making cuts and have no January allocations. Their production reportedly rose by 140,000 b/d in November.

Libya's National Oil Corporation (NOC) chairman Mustafa Sanalla said production has risen to about 600,000 b/d after Eastern oilfields were "liberated." He said production could be 900,000 b/d by year-end if production is resumed from Western oilfields. He said despite difficult times, "we are still working."

Conclusions

As a result, the rest of OPEC has to cut that amount (140,000 more) from other member's allocations (except for Iran, which has been given a fixed number) to remain within the 32.5 ceiling. Those cuts now add up to 1.470 million barrels per day (26% more than the adjustments in the Agreement), assuming Libyan + Nigerian production remains at their November levels.

Based on the Agreement, I have calculated below the new adjustments:

MBD

Reference

Adjustment

January

*Algeria

1,089

-62

1,027

-5.72%

*Angola

1,751

-100

1,651

-5.72%

*Ecuador

548

-31

517

-5.72%

*Gabon

202

-12

190

-5.72%

*Iran

3,690

90

3,780

2.44%

*Iraq

4,561

-261

4,300

-5.72%

*Kuwait

2,838

-162

2,676

-5.72%

Libya

528

60

588

11.36%

Nigeria

1,628

80

1,708

4.91%

*Qatar

648

-37

611

-5.72%

*Saudi Arabia

10,544

-604

9,940

-5.72%

*UAE

3,013

-172

2,841

-5.72%

*Venezuela

2,067

-118

1,949

-5.72%

Totals

33,107

-1330

31,777

-5.72%

* Totals

-1470

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I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.