Even after all the fanfare surrounding OPEC’s success in cutting output and nearly reaching goals set out for the entire cartel, a powerful force is reemerging as a potential deal breaker. The advent of higher prices has allowed producers in the United States to continue ramping output higher over the last few weeks with no end in sight for the gains. Now that US energy policy is likely to undergo a significant shift thanks to the approval of the Keystone XL pipeline and potential shifts in taxation, American production has significant room to rise over the medium-term on the back of more comfortable policy measures.

However, besides the gains in US production, another serious force to be reckoned with has resurfaced: Libya. Exempted from the OPEC deal, the country has made significant strides towards restoring production that has been volatile to say the least.  With fighting in the Eastern, oil-rich provinces still raging and presenting difficulties in completely bringing back to life the 1.600 million barrels per day produced under the Gaddafi regime, the country has nevertheless made significant progress in raising output. Considering the complete backdrop, the levelling out of oil prices may see the fragile equilibrium reached by OPEC swiftly destroyed.

Production Climbs as Stockpiles Gain

One of the telltale signs of the health of the energy economy is weekly data produced by the US Department of Energy. Figures released on Wednesday showed that US crude oil inventories rose for a third straight week, climbing by 2.840 million barrels. However, more important than the stockpile gains was an increase in production that is consistent with the rising rig count. Oil services giant Baker Hughes reported the largest addition in active drill rigs last week since 2013, with the count rising by 29. Production has been matching these gains, with output reaching 8.961 million barrels per day for the week ended January 20th.