OPEC, driven by new 405 MBOPD of Saudi production, announces largest net production increase in 12 months
OPEC has released its Monthly Oil Market Report, outlining the cartel’s assessment of the state of the international oil industry.
The group produced an estimated 32,327 MBOPD in June, up significantly from last month. Net output is up 173.4 MBOPD, the largest single-month increase in a year. Like the past two months, most of this production growth was driven by Saudi Arabia.
Following through with jump to 10.42 MMBOPD
The kingdom is following through on its recent commitment to increase oil production in a big way, and added 405.4 MBOPD in June. Saudi Arabia is now producing 10,420 MBOPD, the largest level seen in the country since before the cuts were implemented, and above the average in 2017 or 2016.
This growth in production will likely be apparent in July data as well, as the country has continued to ramp output in the aftermath of the OPEC meeting late last month.
Several other OPEC members also increased production, further accomplishing the group’s recently-announced goal of adding oil to global markets. Iraq, Kuwait, UAE and Nigeria each increased production significantly in June, adding a combined 161.7 MBOPD. Of these, Iraq, Kuwait and UAE are likely adding production primarily in response to the recent OPEC deal, as they each have production capacity that can be brought online if desired. Nigeria’s increased production is likely not as intentional, as the country is still dealing with instability that occasionally disrupts output. This occurred in May, when Nigerian output dropped by 132 MBOPD.
Libyan port disruptions cause major production drop
The large increases in production from many OPEC members were counterbalanced by similarly large decreases from Libya, Angola and Venezuela.
Libyan production experienced a major disruption in late June and early July, when control of a major oil-exporting port became disputed. This caused Libyan production to rapidly decline, as there was no way to ship the majority of the country’s output. While Libya averaged 708 MBOPD in June, down 254.3 MBOPD from May, its production rate fell significantly below this level during the port struggle. Libya’s NOC’s chairman estimated the company was producing only 527 MBOPD in early July.
The port finally returned to normal last week, and exports have resumed, so Libyan output may be up next month.
Angolan production fell due to technical difficulties in several offshore fields and natural decline in established fields, which combined to drop output by 88.3 MBOPD. Venezuelan production continued the trend that has been seen for the past few years, with yet another steady decline. Production dropped by 47.5 MBOPD in June, roughly in line with the declines seen so far this year. At this pace the South American producer, one of OPEC’s founding members, would see production drop to zero in just over two years.
Congo becomes newest OPEC member, adding 331 MBOPD
OPEC production also shifted this month due to a rare occurrence, the group added a new member. The Republic of the Congo is OPEC’s 15th member, and the sixth African member. Congo adds 331 MBOPD to the cartel’s output. Despite this addition and the large boost in Saudi production, the group’s production is actually down year-over-year, on the decline in Venezuelan, Angolan and Libyan output.
Oil prices: back to volatility
The disruptions in Libya served to drive up oil price futures significantly in June, with Brent hitting $79 by end of the month and again in early July. Both key benchmarks dropped hard on Monday, though. Brent September contracts went from a high of $75.37 to a low of $71.53 and back up over $72 during trading Monday. WTI traded as high as $70.52 early on Monday, then bounced off a low of $67.58 to trade above $68 in the afternoon.
