OPEC hits highest monthly output since Aug 2012

Oil production from OPEC totalled 31.28mn b/d in June 2015, up 170,000 b/d from May and the fourth consecutive monthly increase since February, as Saudi Arabia and Iraq pushed out more oil, according to the latest (16 July) Platts survey of OPEC and oil industry officials.

‘This is the highest monthly level since August 2012, when the survey estimated output at 31.54mn b/d,’ said Margaret McQuaile, Senior Correspondent for Platts. ‘At that point, output was on the way down. Now, output seems to be on the way up, and at a time when the market could be looking at a lot more oil from Iran.’ The June total leaves OPEC pumping nearly 1.3mn b/d in excess of its official 30mn b/d ceiling.

Top producer, Saudi Arabia, driver of the oil producer group’s current market share strategy, further increased its output to produce an average 10.35mn b/d in June. A spike in air-conditioning demand has traditionally boosted the volume of crude burned directly in the kingdom’s power plants during the summer months. In addition, new refineries are pushing domestic use of crude oil higher.

Iraq pushed up volumes from its Gulf terminals by nearly 330,000 b/d to more than 3mn b/d following the commissioning at the beginning of the month of a new storage and pumping system at the onshore Fao terminal. As well as Basrah Light, Iraq is now exporting the newly introduced Basrah Heavy crude oil. But volumes exported from the Turkish Mediterranean port of Ceyhan via the pipeline system of semi-autonomous Iraqi Kurdistan fell by more than half from May levels, raising a question mark over the future of an oil export agreement signed by Baghdad and Erbil late last year.

In early July the Kurdistan Regional Government said it had been forced to boost the sale of its own crude to international markets in June because of a ‘debt backlog’ triggered by federal government budget cuts, leaving less crude available for export from Ceyhan on behalf of Iraqi state oil marketer SOMO.

In Libya, output slipped by some 20,000 b/d to 410,000 b/d as it continued to struggle to raise production due to ongoing security issues and technical limitations. However, the state-owned national oil company is optimistic it can raise output in the near term following the lifting of force majeure at the major Ras Lanuf export facility and a tentative agreement with tribal leaders in western Libya to reopen the pipeline linking the major fields of Sharara and Elephant (El Feel) to ports on the country’s western Mediterranean coast.

OPEC said after its 5 June meeting that members had been urged to adhere to the agreed 30mn b/d ceiling. There is, however, no mechanism in place to enforce any level of adherence as no individual country quotas have been distributed under the ceiling.