Oil prices continued on their downward trajectory on Wednesday as rising output from Libya and increased production of shale oil undermined the cuts. WTI Crude (Jul'17) fell by 0.75%, where as WTI Crude for July 17 fell by 0.60% after the Libyan Authorities announced they were increasing output during the week.
Libya, exempted from the OPEC agreement, is expected to raise its oil output to 800,000 barrels per day this week, as reported by the State authorities that is expected to boost exports for the country. The average exports of Libyan oil during the 2016 stood at 300,000 as the country was struggling from a civil war. This year after an agreement amongst the warring parties in the country’s civil war, the country increased its oil output to reach a level of 500,000 bpd per year in 2017 so far.
Coupled with the rising Libyan oil output is the increasing shale production in the US. American shale oil industry has seen a rise in investments over the last two years; which in turn have raised the number of rigs operating in the region. US Shale production has increased output by 10 percent since the middle of last year. The shale oil production is around 9.3 million bpd, close to top producers Saudi Arabia and Russia.
Rising output from Libya just a week after the announcement of extension in cuts has undermined the OPEC’s ability to raise the declining prices. Russia and OPEC countries agreed to tighten an oversupplied market by cutting production by around 1.8 million bpd until the end of the first quarter of 2018.
Libya is an OPEC member, but it was exempt from the cuts. The United States is not participating in the self-imposed production cuts.