OPEC output climbs as Saudi opens tap

The Organisation of Petroleum Exporting Countries (OPEC) oil output rose last month as Saudi Arabia pumped at a near-record rate. This is a sign the world’s top exporter is heeding calls from the United States (U.S.) and other consumers for more oil, a Reuters survey showed yesterday.

The oil cartel pumped 32.32 million barrels per day (bpd) in June, the survey found, up 320,000 bpd from May. The June total is the highest since January this year.

Saudi Arabia’s move comes as U.S. President Donald Trump has been urging Riyadh to offset losses caused by new U.S. 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 per cent compliance with oil output cuts that began in January last year, after months of underproduction by Venezuela and other countries pushed adherence above 160 per cent.

Oil broker at PVM, Tamas Varga, said the second half of this year is replete with uncertainty.

He said: “We are entering the second half of the year with a huge amount of uncertainty surrounding the supply side of the equation.

“Depending on your belief you could just as easily bet on $100 as $60 by the end of the year.”

Saudi Arabia said OPEC decision would translate into an output rise of about 1 million bpd, although the group’s statement gave no clear volume.

As published on Friday, Saudi Arabia has boosted supply to 10.70 million bpd in June, close to the record high of 10.72 million 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 per cent from 167 per cent 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, Kuwait and the United Arab Emirates, 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 1 million 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 U.S. 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 32.78 million 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.

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