Opec (Organization of the Petroleum Exporting Countries) appeared to score a diplomatic coup last week by persuading Libya, its most troubled member, to accept production limits. In reality, the agreement probably means little for the oil market.
The Opec and its partners agreed on Nov 30 to persevere with supply curbs until the end of next year, in a bid to drain oversupplied world markets. In a surprise addition, an output cap was imposed on members Libya and Nigeria, which had previously been spared any obligations while they struggled to recover barrels lost to armed conflict and sabotage.
The pact seemed to be a reversal for Libya, whose top oil official, Mustafa Sanalla, had outlined the country’s aspirations to revive exports and its need for leniency while nation rebuilding took place.
Yet in practice, the production cap of about one million barrels a day imposes little constraint on Tripoli, which is barely able to push output any higher, consultants Eurasia Group and Wood Mackenzie say. Libya plans to abide by the target next year, according to a person familiar with the matter who asked not to be identified because the information isn’t public.
