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Libya and Venezuela could be OPEC's best hope for saving oil output deal

  • OPEC and other oil exporters are meeting to discuss how to improve compliance with a deal to cut output.
  • Libya needs to come on board in order for the deal to work going forward, RBC Capital Markets' Helima Croft said.
  • Declining production from Venezuela could save the output cut deal, she said.

Two oil-exporting nations could decide the future of a historic deal to drain a worldwide glut of crude oil, according to Helima Croft, global head of commodity strategy at RBC Capital Markets.

It's not top producers Saudi Arabia and Russia, the architects of the accord, but conflict-plagued Libya and Venezuela, a petrostate on the brink of collapse.

Oil producers are meeting in Abu Dhabi on Monday and Tuesday to figure out how to improve compliance with a deal struck by OPEC and other exporters to keep 1.8 million barrels a day off the market. Analysts say top producers Saudi Arabia and Russia have limited options to convince producers to pump less.

The compact has been undermined by surging supply from U.S. drillers, as well as OPEC members Libya and Nigeria, which were exempt.

OPEC initially gave Libya a pass because the northern African nation was still restoring its oil supply after years of civil conflict. But output has surged about 50 percent to 852,000 barrels a day between November, when OPEC signed the deal, and June.

While Nigeria recently agreed to cap its output in the future, Libya has not yet made any commitments.

"They were never part of the deal. They're going to have to be brought into the deal to make this thing work going forward," Croft told CNBC's "Closing Bell" on Monday.

Meanwhile, Venezuela's production has slumped about 13 percent this year as its economic and political crisis worsens. International oil companies have begun pulling their workers out of Venezuela, Croft noted.

A further drop in production from Venezuela, a major crude oil supplier to U.S. Gulf Coast refineries, could be the secret to removing more barrels from the market and boosting stagnant oil prices.

"What actually could save OPEC is probably going to be Venezuela," Croft said.