July 10 (UPI) -- Persistent concerns about the effectiveness of an arrangement by OPEC and other producers to balance the market left oil prices bruised in early Monday trading.
Libya and Nigeria are two members of the Organization of Petroleum Exporting Countries exempt from the effort to balance the market through coordinated production declines. Both countries were left out of the deal so they could steer oil revenue toward national security efforts, though increased output and improved stability over the last seven months has undermined the effort.
Nigeria's finance minister met last week with OPEC Secretary General Mohammad Barkindo. Tamas Varga, an analyst with London oil broker PVM, said in an emailed newsletter that most market analysts are skeptical about estimates for total OPEC oil demand as it is, "and this is the reason why OPEC must deal with the excess barrels out of Libya and Nigeria in coming weeks or months."
Libya's participation in particular is under close scrutiny because output is still below levels from before the civil war that ended the long dictatorship of Moammar Gadhafi. A headline from Russian news agency Tass, meanwhile, brought further doubts as it referenced a "smooth exit" from the production deal.
"Obviously, it will take several months [to see the impact]," Russian Energy Minister Alexander Novak was quoted by Tass as saying. "[But] with a sharp recovery of production, it is clear that nothing good will happen to the market."
The price for Brent crude oil was down 0.8 percent at about 9:20 EDT to $46.36 per barrel. West Texas Intermediate, the U.S. benchmark for the price of oil, was down 0.88 percent to $43.84 per barrel.
Abdulsamad al-Awadh, the former Kuwait envoy to OPEC, told Bloomberg News that other OPEC producers would have to make concessions for Libya and Nigeria as it's unlikely the two exempt countries would agree to scale back.
"Capping Libya and Nigeria might help but won't cut the supply by much," he added.
Meanwhile, Hassan al-Nasser, the president and CEO of state oil company Saudi Aramco, said major producers will need to keep supplies robust enough to meet what he said was the demand from another 2 billion customers over the next 25 years.
"Saudi Aramco is planning to invest more than $300 billion over the next 10 years and... will boost its position as a leading oil company, maintain its spare capacity of crude oil and start a major exploration and production program to be focused on conventional and non-conventional gas resources," a statement published in the official Saudi Press Agency read.