The Organization of Petroleum Exporting Countries (OPEC) oil output has risen in January from an eight-month low as higher output from Nigeria and Saudi Arabia offset a further decline in Venezuela and strong compliance with a supply reduction pact. The cartel has pumped 32.4 million barrels per day (bpd) in January up 100,000 bpd from December. January’s total was revised down by 110,000 bpd to the lowest since April 2017.
Besides, adherence by producers included in the deal to curb supply rose to 138 percent from 137 percent in December suggesting commitment is not wavering even as oil prices hit their highest level since 2014. OPEC is reducing output by about 1.2 million bpd as part of a deal with Russia and other non-OPEC producers. The pact will run until the end of 2018. OPEC producers will boost output significantly to cash in on rallying prices or to replace a decline in Venezuela, where output is dropping amid an economic crisis.
The organization’s cut has boosted oil prices, which topped $71 a barrel for the first time since 2014. Its members are enjoying the extra income, though some in the group have expressed concern that it could encourage U.S. shale and other supply from outside producers.
An OPEC delegate expressed concern that “Surely an orderly recovery of prices is more preferable and the history shows sudden price rises are not helpful to oil exporters in the long run.” In January the biggest increase in supply came from Nigeria, where some shipments originally planned for export in December slipped into January, according to loading programmes and tanker data.
Saudi Arabia boosted output by 50000 bpd while output in Libya edged higher by 30,000 bpd. The country restored some production that had been shut in by a blockade since November.
However, Nigeria and Libya were originally exempt from cutting supply because output was curbed due to conflict and unrest. For 2018 both countries told OPEC that output would not exceed 2017 levels. Among countries with lower output, the largest drop was in Iraq. The country exported almost 3.5 million bpd from the south, the outlet for most of its crude, in a slight decline from December’s record high. Oil output in northern Iraq is still down after falling in mid-October when Iraqi forces retook control of oilfields from Kurdish fighters who had been there since 2014. This has had the side-effect of boosting Iraqi compliance with the OPEC deal. Production in Venezuela, where the oil industry is starved of funds because of a cash crunch has fallen. Exports rose in January, probably because of lower refinery operations.
OPEC has an implied production target for 2018 of 32.6 million bpd, based on cutbacks detailed in late 2016 and taking into account changes of membership since Nigeria and Libya’s expectations on their 2018 output. According to the survey, OPEC has pumped 200,000 bpd below this implied target in January – not least because of the involuntary decline in Venezuela.