Supply data out this week provide a useful reminder about behavior of the Organization of Petroleum Exporting Countries.
The quota set by the group at its meetings, the next of which will be June 5, is secondarily important. Indeed, when OPEC announced last November that it would not lower the target—30 million b/d, then and now—to accommodate reduced needs for its crude, the weakening crude market collapsed.
Always more important than the quota, however, is actual OPEC production.
The average in April, according the International Energy Agency’s May Oil Market Report, was 31.21 million b/d.
An increase of 160,000 b/d from March output showed the prior month’s high level wasn’t a fluke. The March increase, according IEA’s May report, was 960,000 b/d.
Iraqi output continues to increase—to 3.8 million b/d in April from 3.7 million b/d in March. Libyan production was up by 40,000 b/d at 520,000 b/d.
The most important increase came in Iran, April production from which, at 2.88 million b/d, reached its highest level since 2012. Some might have come from floating storage.
Saudi production, meanwhile, remained high at 10.1 million b/d in April, although down slightly from March.
Countering the increase from OPEC members was a 260,000 b/d drop in output elsewhere. IEA kept its projection for 2015 demand at 93.6 million b/d, up 1.1 million b/d from last year.
Output of OPEC crude thus remains 1.2 million b/d above a group quota 800,000 b/d above what IEA estimates the world needs from group members. Preliminary data indicate inventories in the industrial world continued to rise in April after a counterseasonal increase in March. Prices can’t rise much under these conditions.
The benign interpretation of elevated OPEC production is that Iran and Saudi Arabia are jockeying for market share. But their fraying relations relate to more than competition in the oil market.
If that conflict stays on its present course, OPEC’s quota, amid everything else straining the market, will matter less than usual.
(From the subscription area of www.ogj.com, posted May 15, 2015; author’s e-mail: [email protected])