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The output from other countries that had witnessed downward production are squaring up which may likely lead to output cut by the Organisation of Petroleum Exporting Countries (OPEC).
Similarly, the improved security situation in the oil rich Niger Delta area is helping Nigeria to inch up oil production activities.
The OPEC’s core members may need to consider further production cuts as some of the group’s most troubled nations achieve unexpected supply growth, according to Citigroup Inc.
The ‘fragile five’ of Nigeria, Iran, Iraq, Libya and Venezuela which have struggled with output losses and disruptions for the past few years will add roughly 900,000 barrels a day of production this year and at least the same in 2024, the bank estimates.
That’s enough to satisfy coming growth in oil demand, it said.
“All of a sudden they are sources of growth, and they will be sources of growth for five, four years or maybe even longer in the case of Iraq and Venezuela. It strikes us that the core OPEC+ countries have a problem on their hands,” Citigroup’s head of commodities research, Ed Morse said.
The five nations are all showing positive signs of supply recovery, while growth in oil demand will be constrained by fading expansion in China, Morse said.
Iranian output has recovered as it sends a flood of exports to China while engaging in tentative diplomacy with the US. Iraq may restore supplies when it reaches agreement on a shuttered pipeline to Turkey, and also add capacity.
Nigeria has improved security in its restive oil-rich delta, Venezuela is in talks with Washington on easing sanctions, and even Libya, long wracked by instability, has potential for expansion.
As a result, OPEC leader, Saudi Arabia and its Persian Gulf allies which have slashed production this year to shore up crude prices may face pressure to cut output further, Morse said. The kingdom has already curbed supplies to a two-year low near 9 million barrels a day.
“It’ll be a big problem. I think they’ll have to cut, and I don’t know how easy it is for them to do that,” Morse said.
