There are two main reasons for the drop in OPEC production. John Kingston of Platts says one is a temporary problem, while the other is ongoing and may be more troublesome.
“The temporary reason is that there was significant maintenance at some of the Iraqi operations in that month and that’s coming back. And we would expect Iraq production to get back toward its normal level. The one that’s been a lot more troubling – and it wasn’t new to September, though it seemed to pick up pace in September – are all the problems going on in Libya.”
Kingston is global director of news for Platts, a major provider of information about the energy, petrochemical, metals and agricultural sectors. He said that Libya’s crude oil production has fallen because of strikes and protests.
“After Ghadafi fell, the country’s production came back a lot faster than a lot of people expected. You know, they were producing about 1.6-million barrels a day prior to the Ghadafi fall and the (output) of course dropped down to like not much more than zero – and then climbed back smartly.
But now these problems that have brought production down below half a million barrels a day, they are a little bit more intractable. And they’re not the kind of things that get fixed overnight. So Libya is clearly an issue for the oil market,” he said.
And Libyan crude is not the type that’s easily replaced.
He said, “The Libyan crude is some of the best crude in the world – some of the top quality. So to replace it on the market what you need to do is you need to produce more of a lesser quality crude. So it’s not a one for one. So this is clearly a source of some problems for the industry.”
Kingston said Libya has used its geographic position in North Africa to its advantage by supplying many refineries in southern France. Without a strong central authority, he said, Libyan crude oil production may remain up and down for a while.
“The kind of analogy is to look at Nigeria, which is always up and down depending on the level of political tension and political strife there. You get a couple of months where they get back up over two-million barrels a day and you think, OK, there we go.
= Voice of America