The Energy Information Administration has estimated that the oil export revenues of OPEC members last year declined by 15 percent on 2015 to US$433 billion, on an unadjusted basis. According to the EIA, this was the lowest result since 2014, affected by the drop in crude oil prices and a decline in exports.
This year, however, the EIA is more optimistic for the cartel, projecting revenues to grow to US$539 billion thanks to higher prices and to higher production. In its latest Short-Term Energy Outlook, the authority forecast OPEC daily oil output at 32.11 million barrels for the second quarter of 2017, up from 31.92 million bpd in Q1, rising further to 32.86 million bpd in the third quarter, and 32.95 million barrels daily in the final quarter of the year.
However, the STEO was released before a joint statement from the oil ministers of Russia and Saudi Arabia, in which they said the two countries have agreed to extend the oil production until the end of the first quarter of 2018. Incidentally, the EIA forecast that OPEC daily output in the first quarter of 2018 will average 32.99 million barrels.
The revenue forecast for 2017 might also have to be revised as the extension kicks in and exports continue to be limited, unless prices improve much more substantially. At the moment, Brent is trading around US$52 a barrel and WTI is at US$49.05 a barrel.
Earlier this year, Nigeria’s Oil Minister, Emmanuel Ibe Kachikwu, warned that a production cut is not enough for OPEC to be able to compete effectively with U.S. shale. The organization, he said, voicing the concern of many others, needs to bring down its production costs to become a better competitor. With high production costs, some major OPEC producers need Brent at US$60 a barrel to be able to invest in new production, ensuring the sustainable development of their oil wealth. This price level, however, remains a distant prospect for the time being.
By Irina Slav for Oilprice.com
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Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.