LONDON, June 10, 2013 /PRNewswire/ -- Crude oil production from the Organization of the Petroleum Exporting Countries (OPEC) rose by 70,000 barrels per day (b/d) to 30.57 million b/d in May, a just-released Platts survey of OPEC and oil industry officials and analysts showed.
Increases totaling 180,000 b/d from Angola, Kuwait, Libya, Saudi Arabia and the United Arab Emirates were partly offset by 110,000 b/d in reductions from Algeria, Iran, Iraq and Nigeria.
"All the figures point to a market being significantly oversupplied, and in May, production actually rose slightly. Yet the price of Brent crude oil stays solidly above $100 per barrel, and the organization at its late-May meeting did lower output," said John Kingston, Platts global director of news. "A lot of market participants have been predicting a significant slump in prices for a while as a result of the supply/demand imbalance, yet the markets aren't going along with that forecast."
Saudi Arabia's use of crude for direct burning in power stations rises during the summer months, and the latest survey showed the kingdom increasing output for the second consecutive month after a steady downtrend that took it from 10 million b/d last August to 9.2 million b/d early this year. The survey results showed that Saudi production rose by 100,000 b/d to 9.4 million b/d in May from 9.3 million b/d in April.
Iran's output slipped to 2.68 million b/d under continuing pressure from U.S. and European Union sanctions directly targeting Tehran's oil revenues. The U.S. Congress is currently considering a new bill passed last week by a key U.S. congressional panel that obliges China, India and other countries still buying Iranian crude to cut their purchases by a total 1 million b/d over the next year to avoid penalty. An amendment attached to the bill would also require a reduction in the total value of those imports to deny Tehran the possibility of benefiting from higher oil prices.
Iraq, now OPEC's second biggest producer after Saudi Arabia, saw output edge down to 3.1 million b/d in May from 3.15 million b/d in April as exports dropped.
Nigerian output slid further, to 1.94 million b/d from 1.97 million b/d in April. Nigeria is the OPEC producer most affected by the shale oil boom that has slashed its sales into the United States, but its oil sector is also subject to frequent sabotage by militants in the Niger Delta.
The estimates leave OPEC overproducing its 30 million b/d crude output ceiling by some 570,000 b/d. They also show the oil producer group continuing to pump well above its own 29.84 million b/d projection of demand for OPEC crude this year and above that of the International Energy Agency (IEA) which last month said it expected the call on OPEC crude to average 29.6 million b/d.
In fact, the IEA expects demand for OPEC crude to remain below 30 million b/d for the next five years, thanks in part to the boom in U.S. shale oil production.
OPEC, which was seemingly unfazed by the shale phenomenon, now plans to study it. Ministers, however, decided at their May 31 meeting in Vienna to extend their current output ceiling, which has been in place since the beginning of 2012, through the second half of this year and to review it in early December.
Working with an overall output target under which there are no individual country quotas has allowed OPEC to respond to changing market conditions through informal supply adjustments rather than through the potentially problematic exercise of formal changes to quotas.
Analysts expect the organization's Gulf Arab producers – OPEC kingpin Saudi Arabia in particular – to make any necessary output adjustments in line with OPEC's informal objective of maintaining the price of oil around the $100/barrel level.
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