Analysis: Iraq, Saudi Arabia boost output
Opec kept output steady in July at close to a 38-month high, as Iraq and Saudi Arabia set new production records.
Opec produced 31.83mn b/d last month, down by just 40,000 b/d from June. Output rises in Angola, Iran, Iraq and Saudi Arabia offset the effect of disruptions on supply in Qatar, Libya and Nigeria.
Cutting production, even by as much as 2mn b/d, would do little to boost prices, Opec secretary-general Abdullah al-Badri said on 30 July at a meeting with Russian energy minister Alexander Novak. Al-Badri's comments suggest that the group has no plans to reduce its agreed output level in the near future.
Iranian oil minister Bijan Namdar Zanganeh has previously called for cuts to the group's 30mn b/d production level as a way of supporting prices. But Tehran aims to ramp up its own production as soon as the agreement reached over its nuclear programme can result in the lifting of sanctions.
Opec has produced more than 30mn b/d since July last year. But lower prices are helping to stimulate demand growth, to the extent that the market should be able to absorb rising Iranian output, al-Badri says. Opec last month revised up its forecast for world oil demand growth this year by 100,000 b/d to 1.28mn b/d compared with its June forecast. Demand growth will rise to 1.34mn b/d next year, the group says.
July production rose fastest in Angola, after Total started up its Dalia Phase 1A development in offshore block 17, boosting the Dalia stream to around 230,000 b/d. The extra supply is likely to keep up the pressure on Dalia's discounts to Atlantic basin crude benchmark North Sea Dated, which have been more than $3/bl since May.
Saudi production increased by a relatively modest 30,000 b/d, Argus estimates, but this was still enough for it to hit an all-time high of 10.6mn b/d. Saudi Arabia has raised its official formula prices for September-loading cargoes to Asia-Pacific, possibly in response to the rising premium of front-month Dubai crude to month-three contracts — an indication of firm prompt demand. Extensive buying by PetroChina trading arm ChinaOil has helped push front-month prices some 70¢/bl above third-month contracts. ChinaOil bought 10 cargoes of 500,000 bl each on 3 August through the Dubai partials market, a record daily amount for a single trading firm.
Iraqi output rose to a fresh high of 4.19mn b/d. State marketer Somo loaded 3mn b/d at its southern terminals for a second consecutive month. But it shipped just 40,000 b/d from the Turkish port of Ceyhan, down from 165,000 b/d in June, while the semi-autonomous Kurdistan Regional Government raised loadings to 510,000 b/d from 380,000 b/d over the same period.
Pipeline shutdowns shaved 120,000 b/d off Nigerian production in July. Shell reopened the Trans-Forcados pipeline in mid-July after declaring force majeure in May. And some July Bonny Light shipments were deferred to August, because of leaks on the Trans-Niger pipeline. Export disruptions and higher demand, reflecting strong gasoline margins, helped boost Nigerian crudes relative to North Sea Dated.
Libyan output fell by 30,000 b/d last month to 400,000 b/d, with output at the start of August even lower. NOC had to reinstate force majeure at the 200,000 b/d Ras Lanuf crude export terminal on 23 July, three weeks after lifting it, because of unrest. Only two of seven onshore Libyan terminals are operating at present. Algerian output was steady in July, but exports fell after a crude unit at Sonatrach's 350,000 b/d Skikda refinery returned from maintenance.
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