Opec said on Tuesday its output was up last month for the first time this year on surging output from Nigeria and Libya, which are not subject to the group’s restraint deal agreed last year.
The combined increase from the two African producers last month totalled more than 350,000 barrels per day (bpd), reversing more than a quarter of the cuts achieved by the group as a whole in the first four months of the year.
Opec had reported previously that production had fallen each month from January through April for a cumulative 1.2 million barrels per day decline to 31.8 million bpd.
Although rising Libyan and Nigerian output had already been factored in, and despite a move on Tuesday by Saudi Arabia to trim its oil shipments to Europe and Asia, benchmark North Sea Brent crude oil was down 16 cents at US$48.13 per barrel in trading late afternoon Arabian Gulf time.
Prices had been steady in the mid-$50s through March but have been volatile since on conflicting information about the effectiveness of the deal Opec and 11 other non-member producers have to cut into the world glut.
“Indications that crude [oil] arrivals into major markets have been impacted by supply cuts are so far limited at best,” says Eugene Lindell, an oil market analyst at JBC Energy consultants in Vienna, adding that Saudi Arabia’s move “may signal a new determination to tighten markets,” even if it just amounts to “traditional verbal support”.
Tuesday’s Opec report showed that output for each of Libya and Nigeria rose by more than 170,000 bpd last month, while Iraq also increased its output by 44,000 bpd for a total net group gain of 336,000 bpd to 32.1 million bpd. Other Opec members held output at their pledged levels under the deal.
The increases in Libya and Nigeria were expected after recent news that major oilfields in each country had come back online after being shut during civil unrest in both countries.
Libya’s crude oil production was reported by “secondary” sources tracked by Opec – ie, analysts that track production, tanker shipments, etc – to be 730,000 bpd.
However, some market players are saying that it has already surpassed 800,000 bpd after the restart of the country’s largest fields, El Sharara and El Feel.
That total is still only half the rate of 1.6 million bpd the North African producer averaged before the 2011 civil war and Libya’s National Oil Company is planning to raise production this year to 1.3 million bpd as a period of relative calm has allowed infrastructure rehabilitation to continue.
As in Libya, oilfields in Nigeria have been brought back as militant activity has subsided, and there is still some space left to rise.
Royal Dutch Shell, The largest operator, last week lifted the force majeure on oil exports from Forcados, one of Nigeria’s largest fields, which had been in place for well over a year. June shipments are expected to average 250,000 bpd, thus adding to Opec’s difficulties in speeding up a reduction in world oil inventories.
Opec said the inventory picture has been mixed. Preliminary data for May showed that US total commercial oil stocks were just above 1.3 billion barrels, still 159 million barrels above the five-year average, while in China they were at 382 million barrels in April (the latest monthly data), which was 15 million barrels down on the year. To trim the five-year average, Opec and the Russia-led group of 11 countries have agreed to extend a six-month global oil output cut that ends this month into the first quarter of next year.
amcauley@thenational.ae
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