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Libya orders oil cuts of 270K bpd

Libya orders oil cuts of 270K bpd

Libya has asked oil companies to slash production by 270,000 barrels per day from Jan. 1, the latest such reduction by an OPEC member as the producer group struggles to boost faltering oil prices.
The announcement Tuesday by the head of the National Oil company came as the 13-member Organization of Petroleum Exporting Countries appears to have stepped up compliance with a series of production cuts over the past three months. The group is trying to halt a nearly 70 percent plunge in crude prices since mid-July highs of nearly $150 per barrel.
Shukri Ghanem, Libya's oil chief, told The Associated Press the country would cut almost 20,000 more than the 252,000 barrel per day reduction it was committed to under the group's quota system. The cuts, effective Jan. 1, would be from September levels.
"The corporation has asked oil companies (in Libya) to cut output by 270,000 barrels per day, which is more than Libya is required to do under the OPEC-brokered agreement" in Oran, Algeria, Ghanem said in a telephone interview on Tuesday.
"This is a positive step for boosting oil prices, and I believe that all the (OPEC) countries will abide with the agreement," Ghanem said.
In its Dec. 17 meeting in Algeria, the group agreed to slash output by a further 2.2 million barrels per day from January 2009, bringing its total cuts since September to 4.2 million barrels per day. OPEC produces over 40 percent of the world's crude.
The group has implemented two solid cuts in the last three months. A 1.5 million barrel per day reduction in October failed to halt the slide in crude prices, as did the record reduction in Algeria that was to take effect from Jan. 1. In September, it had implemented so-called paper cuts of 500,000 barrels per day, mainly aimed at ensuring output compliance.
"It's been pretty good. I was surprised," said Conrad Gerber, head of the Geneva, Switzerland-based oil tanker-tracker firm Petro-Logistics SA. "But I think they're living in desperate times and, for once, they're doing what they intended to do. The 1.5 million cut, plus the 500,000 barrel per day cut agreed to in September, seems to have been achieved."
Despite its history of cheating on quotas, analysts say the group appears to be making a sincere bid to curb production as it struggles to engineer a rebound in crude prices.
The United Arab Emirates, OPEC's fourth largest producer, was the first to indicate its compliance with production cuts last week.
The Gulf nation's Abu Dhabi National Oil Co. told customers in letters dated Dec. 25 that it was cutting its main Murban crude allocation by 15 percent and Upper Zakum crude allowance by 3 percent in January in accordance with the OPEC cutbacks.
The letters, also provided to The AP, outlined cuts of 10 to 15 percent of all types of ADNOC crude in February.
On Saturday, Ecuadorean President Rafael Correa said the South American nation would suspend crude production by Italy's Agip and reduce quotas for other companies to comply with new OPEC cuts. Agip produces 28,000 barrels of oil a day from Ecuador's Amazon jungle.
"It seems that we are being fed each day with another OPEC country sending out a PR piece about how they are enforcing the cuts," observed analyst Olivier Jakob of Petromatrix in Switzerland.
The push to comply with the December decision reflects efforts by the group to put a floor under the plummeting prices, and bring them more in line with the $75 per barrel figure that Saudi Arabia's King Abdullah indicated would be fair for both consumers and producers.
Libya's cut is the latest such effort.
Under the October cut, which was to be fully implemented by December, Libya's quota was 1.62 million barrels per day, said Gerber, adding that the group had been working hard to limit their output.
According to Gerber's figures _ which come from carefully monitoring tanker shipments and do not include oil in storage _ OPEC had already cut output by 1.56 million barrels per day by the end of November, and has slashed another 320,000 barrels per day in December.
Many officials at the Vienna-based organization were unavailable for comment because of the New Year holiday.
The OPEC 11 _ minus Indonesia and Iraq, which are not bound by quotas _ are currently producing 27.1 million barrels per day, he said, about 200,000 barrels per day below the target they set in their October meeting in Vienna.
Iraq's oil minister, meanwhile, said Monday that the war-ravaged country averaged exports of about 1.85 million barrels per day in December, nearly 90,000 barrels a day more than the previous month.
So far, the brunt of the cuts have been borne by OPEC heavy hitters Saudi Arabia, Kuwait and the UAE. Gerber said that the current level is at least partly linked to the inability of some other members like Venezuela and Nigeria to even meet their allocations.
Saudi output was down about 1 million barrels between October and December, he said, and the kingdom _ the only OPEC member with significant spare production capacity _ was expected to cut another 300,000 barrels per day in December, bringing it down to 8.2 million barrels a day, he said.
Gerber said Venezuela's production is closer to 2.3 million barrels per day, well below the 3.1 million barrels the country says it is producing.
Similarly, Nigeria was producing about 100,000 barrels per day under its 2.05 million barrel target, he said, noting that this was linked to political instability and rebel attacks in the African country that have repeatedly undercut production efforts.
Venezuela and Iran are known as the price hawks in the group, and are traditionally the least likely to comply with output cuts as they depend heavily on oil revenue. Venezuela also needs high oil prices for its heavier oil projects to be economically feasible, analysts say.
Saudi Arabia has "really come down heavily," said Gerber. "It remains to be seen where they go from there. They've got to be convinced, first, that everybody else is going along. They've seen this before _ where they've done the cutting and others have done the cheating."
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AP Business Writers Tarek El-Tablawy in Cairo, Egypt, and Adam Schreck in Dubai, UAE, contributed to this report.


Updated : 2020-12-01 08:06 GMT+08:00