Oil production from Nigeria, Iraq, Libya could reshape global oil market – analysts

Nigeria, Iraq and Libya looks set to dictate the direction of global oil prices as capacity decline is expected from Iran following US sanctions billed to kick in on November 4 and as Saudi Arabia continues to battle the fallouts from the killing of Washinton Post Columnist Jamal Kashoggi.

A crude oil loading programme seen by Reuters says Nigeria’s Bonny Light crude oil stream will load 263,483 barrels per day in December, up from 169,467 bpd originally scheduled for November, and Forcados crude oil have been set at 217,900 bpd in December, versus 210,500 bpd in November.

The announcement that Iraq’s oil production rate had hit a record-high of 4.78 million bpd, has made the country, an OPEC member, the world’s fourth-largest oil producer, ahead of Canada, and a pointer of shift in global oil production.

While Libya has been plagued by crises which have resulted in production outages, the country has become a resilient producer and analysts believe these countries can swing oil prices higher or lower.

“If—and that’s a big if—both Libyan and Nigerian production is affected and it is as bad in Libya as the incident this summer, we could see 600-700,000 bpd disappear from the market,” Vandana Hari, founder of Vanda Insights, a Singapore-based provider of research and analysis on the global oil markets told S&P Global Platts.

Hari further said, “That would surely have OPEC running on fumes if it is already stretched covering the loss of barrels from Iran. However, if it is just Libya or Nigeria and the problem is it a prolonged one, OPEC may be able to compensate and we wouldn’t necessarily see a sustained spike in crude.”

Analysts say the risk of oil prices hitting $100 before the end of year could be hinged on what happens in these countries as much as developments in Iran and Saudi Arabia.

Ole Hansen, Saxo Bank’s head of commodity strategy told Oilprice there was no doubt that the outages, if materialized, would increase the market volatility. “Additional uncertainty about supply on top of Iran,” Hansen said, “should support the price while reducing the current focus on a demand destructive global slowdown.”

Nigeria and Libya are preparing for general elections raising the spectre of crises. Following the 2015 elections, Niger Delta militants wiped off a third of Nigeria’s production helping oil markets experience a rebound.

There are concerns that if the elections do not produce a peaceful outcomes next year, the risk to oil production may set in.

Helima Croft, global head of commodity strategy at RBC Capital Markets told CNBC this week that with elections pending in both Libya and Nigeria, supply could be threatened.

“If you’re going to have Venezuela continuing to decline, a million barrels of Iran off the market, you can’t afford to lose another big, major producer,” Croft said.

RBC also warned its clients that half a million barrels daily could be wiped out from the combined production of Nigeria and Libya after the elections.

ISAAC ANYAOGU