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Rig counts from the Organization of Petroleum Exporting Countries (OPEC) sank to the lowest level since June 2013, according to data from Baker Hughes. The drop comes despite Venezuela adding 13 rigs to its fleet. The remaining 10 members in the report (Iran data is excluded due to sanctions) combined for 19 fewer active rigs.

Libya has only three running rigs – the lowest since 2011, when a civil war brought oil production to a standstill. Production has been wildly inconsistent since January 2014, ranging from 250 to 850 MBOPD as various disruptions have affected output. As if the feuding governments weren’t enough, the Islamic State is nearing a key export facility and has publicly expressed their intentions of capturing the port.

Saudi Arabia, meanwhile, reduced its rig count by two, ending a 20-month streak of either maintaining or adding to its fleet. The current Saudi rig count of 124 is still 55% higher than August 2013’s count of 80. Kuwait trimmed its activity to seven rigs – the lowest since November 2013.

More Production Incoming?

The cartel announced no changes to its 30,000 MBOPD production quota in its meeting last week. The quota is basically a formality, considering countries are pumping crude at record highs and ignoring production cut pleas from its smaller members. Bloomberg reports production for May 2015 averaged 31,579 MBOPD, marking the 12th consecutive month of volumes exceeding the cartel’s target.

The United Arab Emirates, a member who said in January that the production quota would be unchanged, just purchased 14 additional rigs to satisfy “expansion plans and increased customer demand.” The UAE, along with Kuwait and Saudi Arabia, are armed by some of the world’s largest sovereign wealth funds and are well positioned to endure the oil price downturn. The UAE and Kuwait are currently producing at their highest level in 20 years, with the former intending to increase its capacity to 3,400 MBOPD by year-end 2017.

Seplat Petroleum Development, a producer in Nigeria, says the country can boost its crude output by lessening its dependence on the government, which reportedly owes more than $1 billion to suppliers across the entire oil chain. The Wall Street Journal estimates Nigeria’s breakeven price is about $88/barrel, and the country stands to lose about $40 billion in export value due to the price slide. In May, the country had already reached the halfway point of its 2015 spending plan.

Last week, Seplat’s Chairman implored Nigeria’s government to explore joint venture options based on a production-based cash percentage, rather than relying on payments from the government. “That way you ensure that growth in the industry is guaranteed, that the production will increase, that the reserves will be increased and that there will be room for exploration activities as well,” he said.

The possibility of Iran unlocking its trade doors also looms over the market. The restricted OPEC member believes it can return its export volumes to “pre-sanction levels” within three months in the event sanctions are actually lifted. Several oil majors have reportedly shown interest in developing the country’s reserves, which are the fourth highest in the world.

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