OPEC output steady, Saudi compensates for Iran fall Survey shows Kingdom is showing little sign of changing its policy of high oil output to support the global economy
OPEC's oil output has remained close to its highest since 2008 in June as extra oil from Saudi Arabia and Iraq has compensated for a drop in Iranian supply to its lowest level in more than two decades, a Reuters survey found on Friday. U.S. and European sanctions have pushed Iran from second-largest producer in the Organization of the Petroleum Exporting Countries to rank third behind Iraq. The survey added 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 $90 a barrel from near $130 in March. "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," said Paul Tossetti, senior energy adviser at PFC Energy. Supply from the 12-member OPEC has averaged 31.63 million bpd as the end of the month approaches, down from a revised 31.70 million bpd in May, the survey of sources at oil companies, OPEC officials and analysts found. Production is down only slightly from its highest in four years. OPEC pumped 31.75 million bpd in April, the highest since September 2008, based on Reuters surveys. OPEC is pumping 1.63 million bpd more than its official ceiling of 30 million barrels per day (bpd), despite agreeing to stick to that target at a June 14 meeting. With Iranian output falling, other members are seen as unlikely to implement large cutbacks. "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," said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas in London. Oil was up more than $4 a barrel at $95.41 on Friday after European leaders took steps seen as easing the region's debt crisis. The biggest drop in supplies came from Iran, whose crude is subject to a European Union embargo starting on 1 July that also bars EU insurance firms from covering Iran's exports. Iran's supply slipped by 180,000 bpd to 2.95 million bpd in June, according to the survey. That would be its lowest output since it produced 2.81 million bpd in 1989, according to figures from the U.S. Energy Information Administration. Earlier this week, Iran acknowledged for the first time that exports had fallen significantly. According to sources outside Iran, its exports posted the first sizeable decline in March in response to the looming EU embargo. Europe and the United States are trying to squeeze the revenues Iran makes from its oil exports to force it to halt a nuclear programme 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 programmes 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 bpd to 1.48 million bpd, 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 bpd, the survey found, taking output to 10.10 million bpd, the highest in decades. Saudi supply in May was revised 100,000 bpd lower. Supply also rose in Iraq as increased exports from the country's south offset lower shipments from the north, making it OPEC's second-largest producer, ahead of Iran. According to the EIA's annual data, that has not happened since 1989. Iraq's oil expansion, still in its early stages, may fuel OPEC rivalries as it draws closer to Saudi production and sanctions undermine Tehran's role as an oil power. In the 1980s, Baghdad and Tehran sparred over OPEC quotas. "The wealth for Iraq, the oil, is going to create more competition - definitely with the Saudis," Ali al-Dabbagh, Iraq's government spokesman, said last week at an energy conference in London. "The Saudis want to keep leading this market - but a player is coming."
