Libya and Iran are two OPEC countries exempted from a supply agreement between OPEC and partners, including Russia, known as OPEC. The deal helped lift 2020 spending from notable lows in April as the COVID-19 pandemic whittled down demand.
Oil production in Libya received a positive response after the leader of eastern Libya, Khalifa Haftar, announced on September 18 that his powers would remove an eight-month oil barricade on exports.
The overview discovered output went higher than normal by 70,000 bpd in September.
Libyan oil production has arrived at 680,000 barrels for each day (bpd), more than a third higher than it was earlier in October, as they look to restore their oil industry.
Libya’s National Oil Corp. (NOC) finished power Majeure on the last two facilities shut by an eight-month barricade of oil exports by Eastern powers.
The barricade on oil exports in January brought the Libyan production low, to around 100,000 bpd from 1.2 million bpd. The current output level indicates an increase from around 500,000 bpd earlier in October.
Oil from Iran increased by 120,000 barrels per day as exports rose in September despite U.S. sanctions, in line with average tanker tracking estimates, which are more extensive than in previous months.
Iran has about 10% of the world’s dependable oil reserves and 15% of gas. It is the second-largest OPEC exporter and the fourth-largest oil producer in the world. As one of the largest oil producers in the world, Iran is poised to regain its lost market share to competitors due to US sanctions. In the case of Joe Biden, winning Donald Trump to become the 46th US President.
Biden signed that the United States, under his presidency, will revert to the 2015 nuclear deal that Washington negotiated when he was Barack Obama’s vice president. This means that economic sanctions imposed by Trump on Iran could eventually be eased, paving the way for Iranian oil exports of more than two million barrels a day.
Although Iran can produce around 3.8 million barrels per day, it pumps only half of that and consumes most of the oil itself.
Iranian oil is expected to hit the market in the months following Biden’s election and will be a real headache for OPEC. The deadline for the oil market is full. The OPEC cartel, to which Iran belongs, is limiting supplies to raise prices as the coronavirus ruins demand. Brent fell about 3% to below $38 a barrel on Thursday, extending this year’s decline to more than 40%.
Libya has taken a major step towards resurrecting a crumbling oil industry by discovering its largest oil field, a new challenge for OPEC as a large coalition of producers tries to restrict supplies.
Libyan Provincial Energy Company National Oil Corporation cancelled force majeure in the western part of Shararah and ordered its operator to resume production.
The Shararah re-opening follows a ceasefire during the protracted Libyan civil war, which has already brought many oil fields and ports into effect in the east after being almost completely closed in January.
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The camp, producing 70,000 barrels a day, came into existence after the closure and restart of Sharara, as it was powered by electricity from a larger neighbour.
Libya’s manufacturing sector is now returning to the market as OPEC pledged to collapse. Oil prices are expected to rise slightly in the last quarter of the year, with further gains due to a cold snap in global travel and the ongoing economic recovery.
Analysts expect Brent and West Texas Intermediate prices to drop to a low of $ 40 / barrel, but also see the risk of further declines in oil prices. Oil prices recovered from a drop earlier this year as the global economy stabilized. Oil futures were also temporarily on the negative mark as the market reacted to a huge supply glute and a sharp fall in global demand.
WTI futures fell below $ 40 this week to close at $ 38.71 on Thursday, down 3.9% amid coronavirus concerns and reports of increased production from the OPEC. There is expected to be little price movement, although it is expected that the crude oil market will expand to a 4.9 bpd deficit after OPEC’s cut if demand picks up.
But diesel and jet fuel/kerosene are the largest group of petroleum products in the crude oil market. This means that oil prices cannot rise until the demand for distilleries, including aviation fuel, returns to normal.
Another factor affecting oil prices was the resumption of production in Libya. If Libya should go back to its full potential, it will come back to a million barrels a day. That is another million barrels they don’t need.
It could also put pressure on OPEC +, which is trying to bring oil back to the market. If demand does not reach the mark of the 1990s [millions of barrels per day], OPEC will have to face some difficulties and extend the cuts.
Nigeria, like other oil-producing countries, is suffering from a double economic recession linked to the coronavirus and falling oil prices. Falling oil prices and demand for oil, along with a new OPEC contract to cut production, which Nigeria has yet to fully meet, have weakened the Nigerian government’s revenues more than any other major source.
In the second quarter of this year, Nigeria’s economy decreased by 6.1% year on year due to low oil prices and lockdowns to control the spread of the coronavirus. After the start of the OPEC deal in May, Nigeria’s participation in the deal should have led to a deeper economic recession and budget deficit, as well as increasing pressure on external financing due to falling prices.
Nigeria’s fiscal break-even point – the price of oil on which Nigeria balances its budget- is very high at $133 per barrel given its extremely low non-oil tax. According to the latest World Bank data on Nigeriain June 2020, the collapse in oil prices due to the pandemic is expected to plunge the Nigerian economy into its worst recession in four decades, the worst since the 1980s.