The 12-member Organization of the Petroleum Exporting Countries’ (OPEC) pumped an average 29.57 million barrels per day (b/d) of crude oil in June, an increase of 530,000 barrels per day as Saudi Arabia, Kuwait and the United Arab Emirates (UAE) boosted production, a Platts survey of OPEC and oil industry officials and analysts showed July 8. In May, OPEC production was 29.04 million b/d.
Despite the sizeable month-on-month increase, however, the June volume was lower than the 29.8 million b/d estimated for February, when the escalating unrest sweeping across North Africa and the Middle Eastwas beginning to affect Libyan production. Increases totalling 760,000 b/d were partly offset by combined reductions of 230,000 b/d.
“These numbers show that OPEC still has a lot of work to do, because the world’s economy is going into a period where demand rises, and the loss of Libyan output makes meeting that demand problematic,” said John Kingston, director of news for Platts, a leading global energy, petrochemicals and metals information provider and publisher of this monthly survey report.
“What isn’t certain is just how much of that hole will be filled by the release of oil from strategic stocks ordered by the International Energy Agency, and how much of the burden of supplying the market will be lifted from OPEC because of that action,”Kingstonsaid.
Saudi Arabia boosted output by 450,000 b/d to 9.5 million b/d in June, accounting for the biggest single volume increase. But participants in the survey said that not all of the increment would be exported because of higher demand from the domestic power generation sector.
Saudi production has been climbing in recent months in an attempt to compensate for lost volumes fromLibya. The Saudis even created two “special” crude blends aimed at replicating the higher quality Libyan grades, although these failed to attract refiners.
At OPEC’s June 8 meeting, Saudi Arabia pushed for a 1.5 million b/d output increase on top of estimated actual production of 28.8 million b/d. But Iran, which currently holds the OPEC presidency, Algeria, Angola, Ecuador, Libya and Venezuela opposed an increase and the talks broke up in disarray, leaving OPEC to issue a statement saying that “no formal decision was reached on a production agreement” and that the group would next meet on December 14 in Vienna.
The failure to reach a deal on production levels effectively renders the previous agreement, in place since January 2009 and which set a target of 24.845 million b/d for the 11 members bound by quotas, redundant.
Leaving the meeting, Saudi oil minister Ali Naimi said the kingdom and its Gulf neighbours would unilaterally boost production to ensure that markets were not left short of oil.
OPEC’s own economists had forecast a big jump in demand for OPEC crude in the second half of the year, the Vienna secretariat’s monthly oil market report for May projecting that the call on OPEC would rise by as much as two million b/d between the second and third quarters.
Two days after OPEC’s acrimonious June 8 meeting, the secretariat published a new market report forecasting the call on OPEC crude at 30.9 million b/d in the third quarter–2.1 million b/d more than the second quarter call–and 30.5 million b/d in the fourth. This would leave a “sizeable gap” between estimated production from OPEC and projected demand for its crude, the report said.
The International Energy Agency’s (IEA) June 23 decision to release 60 million barrels of emergency oil stocks, however, has prompted some speculation as to whether Saudi Arabia will increase production to the extent that might have been anticipated immediately after the OPEC meeting.
The IEA said the effect of the disruption of Libyan crude exports had become more pronounced and that the normal seasonal increase in refiner demand over the summer would further exacerbate the shortfall.
The IEA said greater tightness in the oil market could undermine global economic growth, and that it would review the impact of the stock release within 30 days of June 23 to determine if a further release was necessary.
Global crude futures prices initially fell sharply after the IEA announced its stock release, but have since recovered all of that price ground.
Some participants in the survey, meanwhile, have revised their estimates of Venezuelan production following the International Energy Agency’s re-evaluation of its Venezuelan supply methodology last month. This has resulted in the Platts survey’s Venezuelan estimate rising to 2.35 million b/d in June from 2.23 million b/d in May.
