Crude Oil Price
iNVEZZ.com, Monday, June 9: Ministers from the Organization of the Petroleum Exporting Countries (OPEC), which produces about 40 percent of the world’s oil, are expected to leave their oil-production level unchanged in their meeting on June 11 in Vienna. In a Bloomberg survey 22 of the 23 analysts polled made a similar prediction. What might have to change, however, is Saudi Arabia’s production quota within the cartel, as it will have to increase output to record levels to counteract supply shortfalls. "I don't see anything changing in terms of the 30 million barrels-per-day target," an unnamed OPEC source told Reuters. "It should be a fairly relaxed meeting."
"It should be a very quick meeting," Bill Farren-Price, head of energy consultancy Petroleum Policy Intelligence, told AFP.
Six months ago, energy analysts predicted OPEC output would be too high and that Saudi Arabia would have to decrease its production to accommodate other suppliers. As crude production from Libya, Iran and Iraq failed to rise as expected, and industrialised nations’ inventories slumped to their lowest levels since 2008, these predictions had to be revised.
According to Energy Aspects Ltd, a consultant, in an interview with Bloomberg, Saudi Arabia may have to produce a record 11 million barrels a day by December to compensate for the slowdown from other producers.
“Now it’s not whether the Saudis will make room, but whether they’ll keep it going and maintain enough spare capacity,” Jamie Webster, a Washington-based analyst at IHS Inc., an industry researcher, told Bloomberg. “OPEC is increasingly having a hard time just doing its job of bringing all the barrels needed,” he added.
Although US production is close to a three-decade peak, largely because of the shale revolution, supply in other parts of the world is waning. Political turmoil in Libya, home to Africa’s largest reserves, have reduced it to OPEC’s smallest producer. Pipeline attacks in Iraq, and the prolonged sanctions on Iran have prevented either country from reaching its potential output capacity. In addition, export bans on US crude prevent its record supply levels from reaching the global market.
The International Energy Agency predicted on May 15 the need for a “significant rise in OPEC production” to be on par with demand of up to 30.7 million barrels a day in the second half of 2014. Oil stockpiles in advanced economies stood at 2.62 billion barrels in April, their lowest level for that month since 2008. It would be “a Herculean task for [OPEC] to surmount given that production has been below 30 million barrels a day for the last five months,” Energy Aspects said in a May 27 note, according to Bloomberg.
During OPEC’s last meeting, Iraq had planned to increase its output by 30 percent in 2014 to 4 million barrels a day, Libya intended to return to its full daily capacity of almost 1.6 million barrels, while Iran was aiming for its highest output in five years, on temporary sanctions’ relief. All three countries failed to meet their targets. Iraq’s daily output has contracted eight percent since February, Libya’s is at one-tenth of capacity, and Iran’s output failed to pick up, while a resumption of sanctions is expected in July if a broader nuclear deal cannot be reached.