OPEC Output Hits Two-Year Low – Analysts Encouraged by Potential Energy Independence in the United States

According to a recent survey by Reuters, OPEC’s oil output dipped to a two-year low, falling from 30.32 MMBOPD in August 2013 to 30.07 MMBOPD in September 2013.

The survey comes despite the fact that Saudi Arabia, the world’s largest oil exporter, has not weaned its production and continues to export more than 10 MMBOPD. The September 2013 OPEC output is the lowest since October 2011, when OPEC pumped 29.81 MMBOPD, according to the survey, and leaves supply a mere 0.07 MMBOPD above its output target of 30 MMBOPD.

“This is a significant reduction and at the same time the Saudis are producing at extremely high levels,” said a participant in the survey. “If it was not for U.S. shale oil, prices would be much higher.”

Generally, a data point to this magnitude would cause global crude oil prices to increase. However, Brent crude has fallen to a sustained level of approximately $108 a barrel from a six-month high above $117 in August when the prospect of a military strike on Syria was near.

Iraq

The biggest fall in supply was in Iraq. Supply declined to 2.7 MMBOPD from 3.1 MMBOPD in August 2013 because of reduced export capacity due to construction work, as well as a pipeline leak that prompted a cut in output. Iraqi and industry sources say two berths at the Basra Oil Terminal have been closed for part of September, reducing export capacity. Exports remain far below capacity in the north, where Sunni insurgents are targeting Iraq’s pipeline to Turkey.

OPEC Member August 2013 September 2013 Total Production

Nigeria

Nigeria’s potential is plagued by many factors, including oil theft from pipelines and rig security issues. A report by the UK’s Chatham Group estimated as many as 100 MBOPD is stolen from pipelines, with thieves inflicting additional environmental and structural damage. Hypothetically, if each barrel costs $100, Nigeria is losing an estimated $3.65 billion per year.

At the Society of Petroleum Engineers (SPE) Offshore Forum, participants claimed the cost to operate in Nigeria’s oil and gas sector is three times higher than any other country in Africa.

Sandy Clark is a Director for Amec, a United Kingdom oil and gas company which currently handles projects for Exxon Mobil, Shell and others.

In an interview with the UK-based Guardian, Clark said: “Nigeria is a huge market for oil and gas business and we have been handling projects for some international oil and gas companies. But our major challenge right now is getting personnel to work in our offshore operations due to the insecurity challenges. Many of our personnel are not ready to work in the rural areas for fear of being kidnapped.”

Iran

Iranian crude exports were estimated at around 1.0 MMBOPD in July and its supply to market stable at 2.65 MMBOPD. Iran’s exports have declined 60% since the U.S. and European enforced sanctions in 2012 designed to hamper the country’s controversial nuclear program.

Iran’s new president, Hassan Rouhani, spoke with President Obama via telephone on September 27, 2013 and the pair both acknowledged a compromise needs to be met. Oil & Gas 360 recently released a feature article on the situation between Iran and Western nations.

Libya

Libya is slowly boosting its production rates despite being embroiled in a workers strike. The country averaged roughly 1.1 MMBOPD in exports in 2012 and exported an average of 0.57 MMBOPD in September. Output reached 650,000 by the end of the month. According to Libya’s ministry of development, its crude production is expected to reach between 0.7 to 0.8 MMBOPD in October 2013, and exports will rise.

Other Nations’ Crude Oil Situations

OPEC countries are not the only nations facing problems on the export market.

Mexico is approaching a fuel shortage due to flaws in its state-run oil company. Petróleos Mexicanos, or Pemex, has sunk deeply in debt due to a lack of government funding, insufficient preparation, and numerous failed projects. The resources boom in the United States trickles down to Mexico’s exports, which is shipping nearly 930 MBOPD less TYT.

The United States, meanwhile, is producing crude at record rates and opening the discussion for energy independence. Marshall Adkins, head of energy research at Raymond James, said “If demand stays flat, it looks like it’s very achievable to get to oil energy independence excluding Canada and the Middle East and everybody else by the end of this decade… You look around the world at the one bright spot and largely because of cheap energy, it is the United States and we are at the forefront of that in Texas.”

Chris Ross, a 40-year oil industry veteran and and professor at the University of Houston’s Bauer College of Business, said, “It does give us choices. It’s no longer a question of doing things we don’t want to do to appease regimes that we don’t like because we need their oil.”

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