Iran’s crude oil production fell by more than 400,000 per day from May 2018 to September, reaching an average of just 3.4 million barrels per day last month, according to the Energy Information Administration’s Short Term Energy Outlook published on Wednesday.
The EIA’s report, delayed one day due to the Columbus Day holiday, pegs OPEC’s crude oil supply at 32.46 million barrels per day on average in 2018—down from 32.68 bpd in 2017. For all of 2019, the EIA forecast a dip in OPEC supplies to 32.14 bpd on average.
Despite declining production from Iran and Venezuela, OPEC managed to lift production for Q3 from 32.31 bpd in Q2 to 32.52 bpd in Q3, according to the report.
But while OPEC as a whole has managed to increase production despite significant losses of two of its members, oil prices have stayed stubbornly high as the market questions whether OPEC can continue to eek out oil in sufficient quantity to offset what is sure to be growing production declines in Iran and Venezuela.
The EIA now estimates that OPEC’s spare production capacity is just 1.4 million barrels per day, “the lowest level since December 2016 when global inventory levels were much higher.” Related: Will Big Oil Ever Win Back Investors’ Trust?
It is precisely this combination of continual production declines, shrinking spare capacity, and dwindling inventory that has led to higher oil prices, with the EIA estimating that spot prices for Brent crude will average $81 per barrel in Q4 2018—in sharp contrast to EIA’s estimate in September’s STEO of $76 per barrel.
Still, the EIA is expecting supply and demand to be “nearly balanced” in 2019, which, the STEO says, shall contribute to downward oil price pressures. Further downward price pressures will be realized when transportation bottlenecks in the Permian are addressed—which is expected to be achieved in H2 2019.
By Julianne Geiger for Oilprice.com
More Top Reads From Oilprice.com:
- Prices Soar As Natural Gas Inventories Hit Decade Low
- The Perfect Storm Bringing China And Russia Together
- Trump Sides With Farmers In Battle Against Refiners