Crude oil production from OPEC declined to the lowest in four years last month, a Reuters survey has suggested, largely because of the continued fall in Venezuelan output and lower production in Iran resulting from U.S. sanctions.
The only voluntary production cut that contributed to the decline was Saudi Arabia's overcompliance with the OPEC+ pact from last December and a similar degree of restraint among the Kingdom's Gulf neighbors and allies.
According to the survey, OPEC members produced 30.23 million bpd in April, down by a modest 90,000 bpd from March but the lowest since the same month in 2015.
The combination of the above three factors earlier this month drove a spike in oil prices, with Brent topping US$75 a barrel after the U.S. announced it would not extend sanction waivers for Iran's biggest oil clients. However, the effect of the announcement was short-lived and a perception that there is enough oil in the world to fill the gap left by Iranian crude pressured prices quickly enough, with Brent now closer to US$71 a barrel and WTI down below US$64 after touching a high of more than US$65 a barrel.
Saudi Arabia's and the UAE's assurances they were ready to reverse their production cuts to make up for the lost supply helped to keep a lid on prices as did Iraq's stated readiness to join them in reversing the cuts.
Rising U.S. oil production also contributed to the lukewarm market reaction to the end of Iran sanction waivers, and a report from the EIA that production actually declined in February, to an average 11.7 million bpd, for the second month in a row, at that, did not change the overwhelming market sentiment. This sentiment was also reinforced by an estimated 6.8-million-barrel build in U.S. crude oil inventories released by the American Petroleum Institute.
By Irina Slav for Oilprice.com
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