Oil: Libya’s output may have reached 1mb/d – Standard Chartered

The main negative story for oil prices in recent days has been suggestions that Libya’s output might have climbed above 1 million barrels per day (mb/d), notes the research team at Standard Chartered.

Key Quotes

“We think its sustainable capacity is about 1.1mb/d, so this brings Libya close to the maximum possible given the current state of the industry, following the damage done to oil reservoirs and infrastructure over the past six years, together with natural field declines. In contrast to the tone of much current market commentary, we do not think Libya’s return to 1mb/d poses any threat to OPEC’s output curbs.”

“The reason Libya was given an exemption from the cuts last November was that its output was expected to rise, and this was fully taken into consideration by the OPEC/non-OPEC ministerial process at the time. If anything, the pace of Libya’s return to the market has been slower than was generally predicted when OPEC met in November 2016. At that point Libya was already producing 0.6mb/d. An extra 0.4mb/d over seven months, in a market of 99mb/d showing demand growth of 1.4mb/d, does not change balances significantly. Further, we think that Libya’s output gains are still precarious; the extra 0.4mb/d this year has a low security of supply.”