Why OPEC’s output rises in August?

Opec’s oil production has risen in August from July, a Reuters survey found yesterday, as a recovery in Libyan supply held up and Angola and Iran boosted supplies, outweighing a further decline in Iraq.

The survey also found Saudi Arabia and other core Gulf Opec producers kept output largely flat and have not cut back to prop up prices, which in August dipped to a 14-month low near $101 a barrel, or to make room for higher Libyan output.

Supply from the Organisation of the Petroleum Exporting Countries has averaged 30.15mn bpd in August, up from 30.06mn bpd in July, according to the survey based on shipping data and information from sources at oil companies, Opec and consultants.

The 12-member Opec pumps a third of the world’s oil.

In August, the largest increase has come from Libya, where supply is up by 100,000 bpd. Still, a linear recovery looks unlikely, analysts say, due to continued conflict.

“I think it will continue, but with setbacks and very slowly,” said Carsten Fritsch, commodities analyst at Commerzbank in Frankfurt. “It will not be a one-way street.”

For now, increases in Libya, Angola and Iran have put Opec’s output above the group’s nominal target of 30mn bpd for a second month. Involuntary outages, such as in Libya, kept output below 30mn bpd in earlier months of the year.

Another sizeable increase has come from Angola, where four cargoes of CLOV crude, a new stream operated by Total, have loaded in August, compared with none in July.

Iranian output climbed in August following a few months of lower sales, the survey found, on higher exports. Iranian output and exports have risen since the start of the year, following a softening of Western sanctions on Iran over its nuclear work.

Top exporter Saudi Arabia, Kuwait and the UAE, kept supply to market largely flat, industry sources said. In Saudi Arabia, high levels of domestic crude burning in power plants offset lower exports, they said.

Of the countries with falling output, the biggest drop of 140,000 bpd has come from Iraq because of a decline in oil exports from its southern terminals due to weather delays.

Iraqi oil officials say the southern fields have not been affected by fighting in other parts of the country. But violence has hit supply of Kirkuk crude from the north and shut down the Baiji refinery, keeping crude output below Iraq’s potential.

Opec is not scheduled to meet to review output policy until November and a dip in prices – Brent crude reached $101.07 on August 19, a 14-month low – has not caused concern, according to delegates and ministers.

“The decline in crude prices is due to seasonal fluctuations and will not last,” Iran’s oil minister, Bijan Zanganeh, was quoted on Tuesday by Iranian news service Shana as saying.