Opec oil output set to reach record high in July: Survey

Opec’s oil output is likely to reach its highest in recent history in July, a Reuters survey found yesterday, as Iraq pumps more and Nigeria manages to export additional crude despite militant attacks on oil installations.
Top Opec exporter Saudi Arabia has kept output close to a record high, the survey found, as it meets seasonally higher domestic demand and focuses on maintaining market share rather than trimming supply to boost prices.
Supply from the Organisation of the Petroleum Exporting Countries has risen to 33.41mn barrels per day (bpd) in July from a revised 33.31mn bpd in June, according to the survey based on shipping data and information from industry sources.
The increase in Opec production has added to downward pressure on prices.
Oil has fallen from a 2016 high near $53 a barrel in June to $42 as of yesterday, pressured also by concern about weaker demand.
Opec’s production could rise even further should talks to reopen some of Libya’s oil facilities succeed.
Conflict has been keeping Libyan output at a fraction of the pre-war rate.
“This could shortly release more oil into an already abundantly supplied market,” Carsten Fritsch of Commerzbank said, although earlier hopes of a restart have not been realised.
“It therefore remains to be seen whether this time will be different.”
Opec’s output has climbed due to the return of former member Indonesia in 2015 and another, Gabon, this month, skewing historical comparisons.
July’s supply from the remaining members, at 32.46mn bpd, is the highest in Reuters survey records, starting in 1997.
Supply has also risen since Opec abandoned in 2014 its historic role of cutting supply to prop up prices as major producers Saudi Arabia, Iraq and Iran pump more.
In July, the biggest increase of 90,000 bpd has come from Iraq, which has exported more barrels from its southern and northern ports despite a pipeline leak that restrained southern exports.
Nigeria, where output has been hit by militant attacks on oil facilities, has nonetheless exported slightly more in July than June, the survey found, although crude exports remain significantly below the 2mn bpd seen in early 2016.
Output in two major producers is largely stable.
Iran, Opec’s fastest-growing source of supply expansion this year after the lifting of Western sanctions, has pumped only 20,000 bpd more as the growth rate tops out for now, the survey found.
Saudi output in July was assessed at 10.50mn bpd, close to June’s revised rate and the record 10.56mn bpd reached in June last year.
“Exports are down a bit, offset by higher direct burn and slightly higher refinery runs,” said an industry source who monitors Saudi output.”For the time being, I’m sticking to my numbers, which suggest supply is flat.” Of countries with lower production, Libyan output edged down due to the stoppage of a major oilfield, Sarir.
Venezuela’s supply is under downward pressure from its cash crunch, slipping further in July.
The Reuters survey is based on shipping data provided by external sources, Thomson Reuters flows data, and information provided by sources at oil companies, Opec and consulting firms.

Opec’s new chief faces fragile unity as oil prices sink again
Bloomberg
London


When Opec’s new chief starts next week, he’ll take over an organisation that’s largely reconciled internal differences after a two-year fight over strategy. But as oil prices sink again, that unity could be at risk.
Nigerian Mohammed Barkindo will be the first new top official at the Organisation of Petroleum Exporting Countries in almost a decade. He comes to the role after a dispute over output policy split Opec’s richest and poorest nations and marked the final months of his predecessor’s tenure. While members now back Saudi Arabia’s tactic of pumping without restraint to choke off supply from rivals such as US shale drillers, many struggle with its effects.
Oil’s 53% recovery since January hasn’t boosted prices enough to relieve the economic pain that pushed some members, notably Venezuela, into a state of crisis. Worse still, crude is sliding back towards $40 a barrel as demand growth slows and the slump in US production levels off, with drilling again on the rise.
“Barkindo is taking the post at a critical time for the organisation,” said Abdulsamad al-Awadhi, who was Kuwait’s national representative to Opec from 1980 to 2001. “His success will not only rely on his relations to Saudi Arabia” and its Gulf allies, “he has to win the confidence of the other founding members: Iran, Iraq and Venezuela,” he said.
Venezuela, Iraq, Nigeria, Algeria and Libya were dubbed by RBC Capital Markets as Opec’s ‘Fragile Five,’’ the countries most at risk of political turmoil as they struggle to balance their budgets. Only Kuwait and Qatar are close to their fiscal break-even points with oil prices at $50 a barrel, according to the International Monetary Fund. Saudi Arabia, while needing higher prices, can tap its foreign currency reserves, the world’s fourth largest, to cover any shortfall. “Clearly, it’s a very divided organisation,” Mike Wittner, head of oil market research at Societe Generale SA in New York, said by phone. “There’s the haves and have-nots. The haves are the core Gulf countries, and then there’s everybody else. In a long and painful down cycle, those divisions become starker than ever.”
Venezuela’s embattled socialist government is struggling to pay for vital imports and service debt, while enduring the sharpest contraction in a decade and the highest inflation rate in the world. Barkindo’s native Nigeria is suffering a recession for the first time since 1991 and a plunge in its currency to a record low as the oil rout is compounded by militant attacks on pipelines and other facilities.
The schism between Opec’s richest and poorest states widened in the run-up to Barkindo’s appointment, as the wealthy Gulf nations insisted on unfettered production to defend market share, while a bloc led by Venezuela urged them to cut output and boost prices.
While Barkindo’s predecessor, Libya’s Abdalla El-Badri, had been due to stand down in 2012 after serving the maximum two terms allowed by Opec’s rules, he was repeatedly asked to stay on as members failed to agree on a successor.
In December 2015, frustrated by their failure to reverse Saudi Arabia’s strategy, Venezuela and its allies insisted that by mid-2016 a replacement should be found for El-Badri, who had defended the market-share policy. Barkindo was chosen as his successor when the group next gathered on June 2.
Barkindo was acting secretary general in 2006 and served for several years as one of Nigeria’s Opec representative. He also was managing director of state-owned Nigerian National Petroleum Corp in 2010. “He is a highly skilful negotiator and middleman” and these qualities “will be tested significantly” by the divisions in Opec, said Ed Morse, head of commodities research at Citigroup Inc in New York.