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OPEC production down from November

OPEC output falls130,000 b/d in December compared to November
OPEC production down from November

Oil production from the Organization of the Petroleum Exporting Countries (OPEC) fell by 130,000 b/d in December on lower volumes from Iraq, Nigeria and Saudi Arabia, according to the latest Platts survey of OPEC and oil industry officials and analysts.

The latest survey -- which expands the estimate for Iraq to bring in volumes from the semi-autonomous Kurdistan region and also includes an estimate for Indonesia -- shows December output fell to 32.28 MMbbl/d from 32.41 MMbbl/d in November. 

“Collapsing oil prices and oversupply used to be a recipe for, at the very least, an emergency OPEC meeting,” said Margaret McQuaile, senior correspondent for Platts, a global provider of energy and commodities information. “That is no longer the case, however, and Saudi Arabia and its Gulf allies appear to be as committed to their laissez-faire production policy as they ever were. Without the support of these countries for an emergency meeting, it seems unlikely that one will take place – in the very short term, at any rate.”

Volumes from kingpin producer Saudi Arabia dipped last month by 50,000 b/d to 10.1 MMbbl/d. The kingdom is facing an unprecedented budget crunch amid the steep drop in oil prices since mid-2014. Despite sliding oil prices, however, it has given no indication that it is ready to abandon the market share strategy that it persuaded OPEC to adopt in November 2014. Indeed, although the December volume was down from that of November, Saudi output remains above the 10 MMbbl/d it has consistently exceeded since March last year.        

The new budget, King Salman's first since taking the throne in January 2015, forecasts spending of nearly US$224 billion, only a small reduction in planned spending compared with 2015. In a research note following the government's announcement in December, Riyadh-based Jadwa Investments estimated the budget to be based on an average crude oil export price of $40.30/bbl and production of 10.2 MMbbl/d.

Iraqi output fell by 50,000 b/d month on month, to 4.25 MMbbl/d from an adjusted November volume of 4.3 MMbbl/d. The Platts survey previously included in the estimate for Iraq only those volumes exported by the Kurdistan Regional Government (KRG) under an agreement reached by Baghdad and Erbil in late 2014 to deliver 250,000 b/d of Kurdish exports on behalf of Iraqi state oil marketer SOMO at Ceyhan; it did not include volumes exported by the KRG on its own account.

Indonesia, which has rejoined OPEC, is estimated to have produced some 700,000 b/d of crude in December.

FORCE MAJEURE

Nigerian output dipped by 40,000 b/d to 1.86 MMbbl/d as a slightly shorter loading program was exacerbated by the declaration of force majeure on Brass River crude exports on 24 December. 

December also saw the restart of the 125,000 b/d Kaduna refinery and the two refineries at Port Harcourt with combined nameplate capacity of 210,000 b/d. By early January, all four of the country’s plants were online for the first time since July last year, although utilization rates were unclear. Nigeria's total nameplate capacity is 445,000 b/d.

A United Nations (UN)-brokered deal between Libya's two rival governments in late December has so far failed to bring about greater political stability, as shown by the recent spate of attacks carried out by the so-called Islamic State.

Libyan production in December averaged 380,000 b/d, largely unchanged from November and still below the 480,000 b/d achieved in March, which was its strongest month in 2015. Libya's oil output continues to languish at a fraction of the 1.58 MMbbl/d level pumped before the 2011 uprising due to instability in the country and technical difficulties at oil fields.

Iran is estimated to have produced 2.89 MMbbl/d in December, up 10,000 b/d from November. Sanctions imposed in mid-2012 saw the country's oil trade limited to 1 MMbbl/d and its customer base squeezed to a handful of Asian countries and Turkey. These sanctions were lifted on 16 January after the International Atomic Energy Agency verified that Iran had complied with its nuclear commitments under a landmark deal agreed with six world powers last July.

Iranian crude output and exports are expected to rise in the coming months, though it remains unclear how quickly Iran's order to its state-owned oil companies to increase crude output by 500,000 b/d will translate into a similar volume flowing onto world oil markets. Iran has said it plans to double its oil exports to 2 MMbbl/d within six months of the removal of sanctions.

Crude prices, meanwhile, remain under pressure from oversupply and brimming stocks, and are trading at multi-year lows. Brent futures sank as low as $27.10/bbl on 20 January, the lowest level since early November 2003. OPEC's own crude basket, representing streams from all 13 member countries, stood at $22.48/bbl on 20 January.

OPEC is not due to meet until 2 June, but the relentless fall in prices has renewed calls for an emergency meeting from the group's more cash-strapped members. Venezuelan President Nicolas Maduro earlier this week called for an emergency meeting to stabilize oil prices.

The Venezuelan president has been trying -- so far unsuccessfully -- to gather oil-producing countries together to stop the fall of oil prices in the international market.

Ecuador's president Rafael Correa, welcomed Maduro's call for an emergency meeting, said an OPEC output cut of 10% would help to stabilize prices.

So far, there has been no sign from Saudi Arabia that it is ready to abandon the market share strategy that it persuaded OPEC to adopt in November 2014.

Indeed, Saudi oil minister Ali Naimi told an event in Riyadh on Sunday he was optimistic that world oil markets would stabilize, that oil prices would improve and that major producing countries would cooperate with each other.

When OPEC decided in late 2014 to defend its market share rather than reduce output, it maintained the 30 MMbbl/d ceiling that had been in place since the beginning of 2012. At the group's recent meeting on 4 December, however, ministers failed to agree on a ceiling level, thus removing the remaining notional constraint on freewheeling production.

Image: Platts logo/ Platts

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