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If A Cut Is Going To Come It Won’t Be From OPEC

If A Cut Is Going To Come It Won’t Be From OPEC

The latest OPEC Monthly Oil Market Report is just out. The data is “Crude Only” production and does not reflect condensate production.

Also the charts, except for Libya, are not zero based. I chose to amplify the change rather than the total. The charts do not include Indonesia. That will be added within the next few months when I am able to get better historical data for Indonesian crude only production.

All Data is in thousand barrels per day.

OPEC production, not including Indonesia, was up 130,700 barrels per day in December.

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OPEC uses secondary sources such as Platts and other agencies to report their production numbers. These numbers are pretty accurate and usually have only slight revisions month to month.

Algeria peaked in November 2007 and has been in a steady decline since that point.

Angola has been holding steady since peaking in 2008 and 2010.

Ecuador appears to have peaked last year. It is likely production will be down, but only slightly, in 2016.

Sanctions were just lifted, in the middle of January, on Iran. I expect their production to be up by about half a million barrels per day by year’s end. However I believe Iran will be the only OPEC nation with any significant production increase in 2016. Most other OPEC countries will, I believe, be flat to down slightly.

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Iraq increased production more than any other OPEC nation in 2015. However I believe their increase in 2016 will be very moderate, if any.

I expect Kuwait will continue its slow decline from its peak in 2013.

Libya is struggling with its own Arab Spring. There is no way of knowing when, if ever, peace will break out there. I think it extremely unlikely they will produce as much as 1,000,000 bpd within the next 5 years or so.

Nigeria is struggling with its own political revolution. But it appears they are in decline regardless of their political problems. However they had the largest increase in January, up 74,000 bpd.

I believe Saudi is producing every barrel they possibly can. They will be lucky to hold this level for much longer.

Qatar has lots of natural gas but their oil production has clearly peaked and is now in decline.

From 2005 through 2010 the oil rig count in the UAE averaged around 12. In November their oil rig count stood at 48, 4 times their average. They have managed to increase their production about 11% above their 2008 peak. I believe UAE production is about to follow Kuwait’s lead and rollover. The UAE’s rig count stood at 44 in January.

Not much can be said about Venezuela. Their conventional oil is in decline but their bitumen production is keeping production relatively flat. They took a hit in January however, down 34,500 bpd.

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The combined production of OPEC, less Saudi Arabia and Iraq, peaked in January 2008 at 19,931,000 bpd and is down 2,778,000 bpd since that date 17,153,000 bpd.

Since the combined production of the other OPEC 10 nations peaked in January 2008, Saudi and Iraq have increased their production by 3,625 bpd, from 10,850,000 bpd to 14,475,000 bpd. That is 33,000 bpd below their peak in June 2015.

Again, none of this data includes Indonesia. Historical crude only data for Indonesia is not available. I will include Indonesia in OPEC charts when I can calculate those numbers.

OPEC average crude only production in 2015 was 31,152,000 barrels per day. In January their production was 31,628,000 barrels per day.

OPEC expects Non-OPEC liquids production to be down 720,000 barrels per day in 2016. If OPEC manages to hold production relatively flat from January, their 2016 production will be up 475,000 bpd. That is their gain would be about 250,000 bpd short of Non-OPEC’s decline.

However I expect OPEC to be slightly up this year due to Iran increasing production. But the increase will be modest as the rest of OPEC will likely be down. However I believe Non-OPEC will be down a lot more than 720,000 barrels per day.

China, the world’s fifth largest oil producer, has peaked and will suffer a sharp decline in 2016.

Why Declining Chinese Oil Production Is Good for Global Prices

China’s role as a big oil consumer has become a crucial factor in energy markets in recent years. Now, its role as a major producer is gaining attention as well.

China is among the world’s top five oil producers, but its fields are growing depleted and are increasingly expensive to pump. The country’s leading companies are choosing to leave more of their oil in the ground and some analysts now say Chinese oil output may have peaked.

Cnooc Ltd., China’s third-largest oil producer–which produces most of its oil from offshore fields–also said last month it expected output to decline by 5% this year, after years of rapid growth.

As China’s production starts to decline, demand for oil from overseas should remain firm, which would be good news for prices, which have been languishing near multiyear lows amid a global supply glut and weak demand in the rest of the world.

By Ron Patterson

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  • Larry on February 15 2016 said:
    This article is unreliable because the author is trying to scare the oil long investors with Saudi & Iraq combined oil production. The actual Saudi oil production of has been no more than 10.2 million barrels (mbpd) per day since Jan 2015, and its peak was in June 2015 with 10.5 mbpd. Saudi is exporting crude oil is less than 7 mbpd. Why did the author combine the Iraq and Saudi production. Most of Opec members already suffered the low crude oil price and ready for bankruptcy, and they are ready to abandon the Opec. Only two Opec countries Saudi and Kuwait might not agree with the cut-back Last year Saudi already ran into 98 billion dollars in deficit while it was selling oil at $45.0 per barrel. If Saudi doesn't ask the Opec cut the crude oil production, your boss will push the oil price down to 10 dollars per barrel. Then how big of the Saudi's deficit would be, and my guess that its will be nearly 300 billion dollars.

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