ORGANIZATION of Petroleum Exporting Countries ‘s (Opec) crude production dipped last month as the United Arab Emirates stepped up implementation of supply cutbacks aimed at buoying global oil markets.
Output from the Opec fell by 120,000 barrels a day to 27.05 million a day, with the UAE accounting for most of the drop, according to a Bloomberg survey. Modest gains in Libya and Nigeria were offset by similar-sized reductions in Iran and Kuwait.
Led by Saudi Arabia, Opec and its allies have been withholding crude output for the past few years in an attempt to defend prices against fragile oil demand and plentiful American supplies. Last month, the coalition agreed once again to delay plans for reviving the halted production.
Yet not all members of the alliance have fully delivered the curbs they promised. While Opec’s own data indicate that Abu Dhabi is abiding by its quota, other estimates including Bloomberg’s survey indicate the UAE is among countries that are overproducing.
The country’s reduction in December may reflect a push for greater discipline. It slashed oil exports to an 18-month low, tanker tracking data compiled by Bloomberg show. State-run oil giant Adnoc is cutting the allocation of crude oil cargoes for some customers in Asia in January and February, according to companies with contracts to receive the shipments.
As a gesture of commitment to the coalition’s goals, Abu Dhabi agreed when Opec+ met last month to postpone an extra 300,000 barrel-a-day ramp-up it had been accorded in recognition of expanded production capacity. The start of the increase was pushed back from January to April and spread over a longer time period.
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Still, the Bloomberg survey indicates that the UAE’s crude production, at roughly 3.2 million barrels a day in December, remains several hundred thousand barrels above its agreed limit.
Oversupplied market
Oil prices have had a strong start to the year, reaching a three-month high above US$77 a barrel in London on Monday, on a combination of cold winter weather and tightening physical markets in the Middle East.
Nonetheless, Wall Street analysts are doubtful the gains will endure, as slowing consumption growth in China and abundant output from the US, Guyana and Canada create a surplus. World markets will be oversupplied by at least one million barrels a day this year, the International Energy Agency in Paris estimates.
The picture could change if US president-elect Donald Trump follows through on threats to renew a campaign of “maximum pressure” on oil exports from Iran, in a bid to contain the Islamic Republic’s nuclear program. Flows to China, Tehran’s most valuable customer, have already shown some signs of faltering.
Iranian production dropped slightly last month, by 40,000 barrels to 3.3 million barrels a day, according to the survey. But despite the threat posed by the incoming president, the country’s output remains near the highest level since Trump’s previous crackdown six years ago. Goldman Sachs predicts that new sanctions will have “only a modest” impact.
Nigerian production increased by 40,000 barrels a day to 1.5 million a day, after the country said it had reached a four-year high, according to the survey. Libya extended its recovery from a recent political crisis, adding 40,000 barrels a day to 1.2 million a day, the highest level in more than a decade.
Bloomberg’s survey is based on ship-tracking data, information from officials and estimates from consultants, including Kpler, Rapidan Energy Group and Rystad Energy. BLOOMBERG
