The Organization of the Petroleum Exporting Countries (OPEC) crude output in June fell by 130,000 BOPD due to lower exports from Iraq and disruptions in Libya and Nigeria according to a recent survey published by Reuters. OPEC was founded in 1960 to bring together multiple countries to ensure the stabilization of oil markets. The 12 member countries of OPEC include: Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela. OPEC’s goal is to secure a regular supply of petroleum to consumers, a steady income to producers as well as a fair return on capital for investors.
OPEC supply averaged 30.38 MMBOPD in June, down from 30.46 MMBOPD in May. Incidentally, this month-over-month decline inadvertently put OPEC back on track to reach their 30 MMPOBD output target estimated by the U.S. Energy Information Administration (EIA).
What’s Behind the Down-tick?
Violence in Africa is making producers in the region OPEC’s weakest supply link. OAG360 notes that just this morning, Egypt’s armed forces threatened to step in the country’s political crisis. The forces are warning President Mohamed Morsi and other politicians they have two days to respond to an outpouring of protests that include demands for his resignation. Egypt is not an OPEC nation.
Additionally, Nigeria is increasingly disrupted by oil spills, flooding and thefts. In Libya, protests at oilfields have led to supply falling below 1 MM BOPD earlier in June, being the most notable drop in OPEC output.
Iraq and Iran have been the main sources of this downward output trend with Iraq shipping 200,000 BOPD less from ports according to shipping data. Iran’s exports fell in May from 1.1 MMBOPD in April to around 1.0 MMBOPD in May according to the survey.
In brighter news, Saudi Arabia, OPEC’s number one exporter, increased supply in response to a seasonally higher requirement for crude in domestic power plants.
OPEC’s leaders are meeting in Vienna Friday to review its output ceiling (30 MMBPD) that has been in place since January 2012.
Global Consumption and Production
From the BP Statistical Review, released on June 12, 2013, the top three oil producing regions were Middle East (32.5%), Europe and Eurasia, including the Russian Federation (20.3%), and North America (17.5%). Oil production in North America (the United States, Canada and Mexico) had the greatest year-over-year change of 8.9%, attributed to the unconventional formation production revolution. Middle East production was up less than 1% and Europe/Eurasia oil production fell 1.4%.
According to the BP Statistical Review, global oil consumption rose 1%, or 89.8 MMBOPD, from 2012 and 2011. Israel’s consumption was up 17.8%, coming in at number one for most increased production. Number two was Kazakhstan increasing consumption by 10%. Asia Pacific, which includes China, Japan and India, was the largest consumer of oil, 29.8 MMBOPD, or 33.6% of global daily consumption. North America consumed 23.04 MMBOEPD, or 24.6% of the global daily oil consumption total. North America’s oil balance is a negative 7.5 MMBOEPD, or 32% short of producing 100% of what North America’s oil consumption. This is a positive contrast to the 11.4 MMBOEPD shortfall in North American production/consumption in 2005.
Analyst Estimates: Crude Oil Prices
EnerCom tracks commodity prices forecasts in its Monthly Energy Industry Data and Trends report. The median analyst estimate at the beginning of June for 2013 NYMEX oil was $92.00 per barrel with a high of $102.50 per barrel and a low of $85.00 per barrel. As of June 13, 2013, we noted that the crude oil futures markets are in a state of backwardation, implying expectations of lower prices in the future.
Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. The company or companies covered in this note did not review the note prior to publication. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. As of the report date, neither EnerCom nor any of its employees has a financial interest in any equity or debt of any company mentioned in this report.