OPEC oil output surge as Iraq, Iran growth offset outages from Nigeria, others
Organization of the Petroleum Exporting Countries’ (OPEC) oil output rose in April to close to the highest level in recent history as production increases led by Iran and Iraq more than offset outages from Nigeria, Libya and Kuwait.
Nigerian output fell to the country’s lowest production level since 2009 with the Africa’s largest crude-producing nation pumping about 1.7 MMbopd, according to the Paris-based IEA. The decline comes as an export terminal for the nation’s Forcados crude is expected to remain shut until June because of a leak that the facility’s operator, Royal Dutch Shell Plc, says was caused by damage “consistent with the application of external force.”
Shipments of another grade, Brass River, were also disrupted because of a pipeline fire. In 2015, Nigeria supplied about 200,000 bopd from Forcados while Brass River shipments averaged 128,000 bopd, amounting to about 6 percent of Nigeria’s total cargoes.
Libya, the holder of Africa’s largest oil reserves, has been remade into separately-run regions, and various armed militias compete for control of its oil fields and related facilities. Three crude ports in the nation have been closed for more than a year.
Libya pumped about 1.6 MMbopd before the 2011 rebellion but it’s now the smallest producer in the OPEC, supplying 330,000 bopd in March. Arabian Gulf Oil Co., a unit of the country’s National Oil Corp. known as Agoco, has reduced output to 130,000 bopd from 230,000 bopd due to a lack of storage capacity at Hariga port, a company official said April 27.
Of the countries that reduced output, the largest decline was in Kuwait due to a three-day workers’ strike which temporarily more than halved oil output and curbed refinery operations. Kuwaiti production slipped 100,000 barrels a day to 2.9 million, the biggest decline in April. However, Kuwait plans to boost oil production to more than 3 million barrels a day within months, doubling output from where it stood during last week’s oil-worker strike.
Loading problems, power failures and other problems dented Venezuela’s supply by an estimated 40,000 bpd. Oil services firm Schlumberger is cutting activity in the cash-strapped nation, posing a threat to future output.
Rebels achieve what oil cartels couldn’t
Rebels in Libya and militants in Nigeria through disruptions, sabotages and explosions are helping to keep a 1.5 MMbpd crude surplus from expanding. And they seem to succeeding where the oil cartels failed.
“Libya and Nigeria are wildcards, and they’re ongoing and will always be unpredictable,” said John Driscoll, chief strategist at JTD Energy Services Pte. “We cannot ignore them from a fundamental perspective, as these disruptions, strikes, sabotages and explosions add to outages. They have to be factored into the market.”
These unplanned outages created the supply curtailments that were needed to erode the overhang. Brent futures settled around $48.13 a barrel, after reaching a 2016 peak at $48.50. It rose 21.5 percent in April, its largest monthly advance since May 2009. US crude futures closed 11 cents lower at $45.92 a barrel, after hitting a year-to-date high at $46.78. It gained 20 percent in April, the biggest monthly gain in a year.
Iran, Iraq boost supply
Supply from the OPEC rose to 32.64 million barrels per day (bpd) this month, from 32.47 million bpd in March. Output has surged since the oil cartel abandoned in 2014 its historic role of cutting supply to prop up prices, led by higher supply from Saudi Arabia and Iraq.
Iran saw the sharpest increase in production in April after Western sanctions were lifted in January. Tehran, which wants to recover the market share it lost, has refused to limit its supply until it reaches pre-sanctions output.
At 3.40 million bpd, Iranian output is within sight of the 3.50 million bpd it pumped at the end of 2011 before sanctions were tightened. However, some of the crude may have come from storage, giving a temporary boost to April supply.
Iraq, which saw the fastest growth in production in OPEC in 2015, also raised output. Southern exports have risen to what may be a new record in April. Shipments of Kurdish crude from the north also rose.
Top exporter Saudi Arabia, however, made no major change to output despite the kingdom hinting it could boost supply after OPEC and non-member nations failed to agree to freeze output at a meeting on April 17.
OPEC meets on June 2 in Vienna and may discuss the freeze initiative again. However, OPEC officials have been encouraged by the price recovery, which may take the urgency out of a renewed attempt to forge a deal.
FRANK UZUEGBUNAM