Opec oil output climbs in June as ‘Saudi opens taps’

OPEC
Two persons pass the Opec logo in front of its headquarters in Vienna, Austria, on June 19. Opec oil output rose last month as Saudi Arabia pumped at a near-record rate, a Reuters survey found yesterday, a sign the world’s top exporter is heeding calls from the US and other consumers for more oil.

Opec oil output rose last month as Saudi Arabia pumped at a near-record rate, a Reuters survey found yesterday, a sign the world’s top exporter is heeding calls from the US and other consumers for more oil. The Organization of the Petroleum Exporting Countries pumped 32.32mn bpd in June, the survey found, up 320,000 bpd from May. The June total is the highest since January 2018, according to Reuters surveys. Saudi Arabia’s move comes as US President Donald Trump has been urging Riyadh to offset losses caused by new US sanctions on Iran and to dampen prices, which this year hit $80 a barrel for the first time since 2014.

Opec and a group of non-Opec countries agreed last month to return to 100% compliance with oil output cuts that began in January 2017, after months of underproduction by Venezuela and other countries pushed adherence above 160%.“We are entering the second half of the year with a huge amount of uncertainty surrounding the supply side of the equation,” said Tamas Varga of oil broker PVM. “Depending on your belief you could just as easily bet on $100 as $60 by the end of the year.” Saudi Arabia said the Opec decision would translate into an output rise of about 1mn bpd, although the group’s statement gave no clear volume.

As published on Friday, Saudi Arabia has boosted supply to 10.70mn bpd in June, close to the record high of 10.72mn bpd, to make up shortfalls in Venezuela and other countries, and expected losses in Iran. This has lowered Opec’s collective adherence with supply targets to 110% from 167% in May, meaning the group is still cutting more than agreed even after the Saudi increase. The Saudi supply boost, apparently set in train before Opec met in Vienna on June 22 to discuss policy, has infuriated Iran and surprised some other Opec members with its scale.

Saudi Arabia’s Gulf allies have yet to follow the Saudi lead, keeping output steady in June, the survey found. Among other Opec members, Algeria also increased output in June due to a diminishing impact from maintenance work and Iraq pumped more as its southern exports rose. The biggest decrease came from Libya, which remains unstable due to unrest. Output fell sharply from near 1mn bpd after an attack in mid-June at the ports of Ras Lanuf and Es Sider shut them down. Nigerian supply dropped due to loading delays affecting several of the country’s crude streams. Iranian output, expected to decline as the US re-imposition of sanctions discourages companies from buying the country’s oil, slipped in June as exports fell from inflated levels in May and April.

Output fell further in Venezuela, where the oil industry is starved of funds because of economic crisis. Opec has an implied production target for 2018 of 32.78mn bpd, based on cutbacks detailed in late 2016 and taking into account changes of membership since, plus Nigeria and Libya’s expectations of 2018 output. According to the survey, Opec pumped about 460,000 bpd below this implied target in June, not least because of the decline in Venezuela and a similar involuntary drop in Angola, where the survey found output further declined in June. The survey aims to track supply to market and is based on shipping data provided by external sources, Thomson Reuters flows data and information provided by sources at oil companies, Opec and consulting firms.

Sources and photo-credits: Gulf Times