OPEC output falls in June as Iran exports drop
The oil output from Organization of the Petroleum Exporting Countries has fallen in June as Western sanctions have pushed Iran's supply to its lowest level in 2 decades, relegating it to the organization's third-largest producer behind Iraq.
According to the Reuters survey, production from the OPEC still has remained close to its highest since 2008 as extra oil from Saudi Arabia, Iraq and Libya has compensated for the drop in Iranian output. To evidence that Saudi Arabia is showing no sign of changing its policy of high oil output to support the world economy, despite a fall in crude prices in June below USD 90 per barrel from near USD 130 in March.
Mr Paul Tossetti senior energy adviser at PFC Energy said that "I don't see Saudi Arabia cutting production by very much until the Iranian embargo situation is clarified and because of concern about global economic growth."
Supply from the 12 member OPEC has averaged 31.63 million barrels per day as the end of the month approaches down from a revised 31.70 million barrels per day in May, the survey of sources at oil companies. Production is down only slightly from its highest in four years. OPEC pumped 31.75 million barrels per day in April, the highest since September 2008 based on Reuters surveys.
OPEC is pumping 1.63 million barrels per day more than its official ceiling of 30 million barrels per day despite agreeing to stick to that target at June 14 meeting. With Iranian output falling, other members are seen as unlikely to implement large cutbacks.
Mr Harry Tchilinguirian head of commodity markets strategy at BNP Paribas in London said that "Ultimately, as demand seasonally rises in the summer and increasing volumes of Iranian oil come under embargo, the likelihood is that OPEC will only need to marginally adjust production lower."
According to figures from the U.S. Energy Information Administration, the biggest drop in supplies came from Iran, whose crude is subject to a European Union embargo starting on July 1st 2012 that also bars EU insurance firms from covering Iran's exports. Iran's supply slipped by 180,000 barrels per day to 2.95 million barrels per day in June. That would be its lowest output since it produced 2.81 million barrels per day in 1989.
According to sources outside Iran its exports posted the first sizeable decline in March in response to the looming EU embargo. Europe and the US are trying to squeeze the revenues Iran makes from its oil exports to force it to halt a nuclear program they fear will be used to make weapons, but which Tehran says is for power generation.
Exports also declined in Angola due to shipping schedules. Loading programs suggest output will slip further in July before rebounding in August. Among the countries boosting supplies, Libya's production continued to recover from a virtual shutdown during the 2011 civil war, rising by 60,000 barrels per day to 1.48 million barrels per day within a whisker of the pre war rate.
The biggest increase in OPEC supply has come from Saudi Arabia, its top producer. There was no sign of its Gulf allies Kuwait and the United Arab Emirates throttling back supplies. Saudi Arabia has pumped an extra 100,000 barrels per day taking output to 10.10 million barrels per day the highest in decades. Saudi supply in May was revised 100,000 barrels per day lower.
Source - Reuters