OPEC’s crude oil production remained largely unchanged from November in December, but that was mostly thanks to a 50,000-bpd decline in Venezuela’s production, as well as further cuts in Saudi Arabia, a Bloomberg survey of ship-tracking data, analyst opinions, and company information has suggested.
At 32.47 million barrels daily, OPEC’s production is a hair below the 32.5-million-bpd ceiling it imposed on its members with the production cut agreement.
But OPEC should hold off on patting itself on the back. While Saudi Arabia and Iran cut their production in December by 20,000 bpd each, Libya’s fell for reasons outside the control of the National Oil Corporation: a pipeline blast temporarily took off between 70,000 and 100,000 bpd off daily production. According to the survey data, Libya’s average daily production decline for the whole month was 30,000 bpd.
Meanwhile, Nigeria raised its oil production by the same amount, effectively offsetting the Libyan supply disruption. All in all, one can’t fail to notice that the 121-perent compliance rate OPEC is boasting with the pact in December was the result of accidents and an inexorable production slide in Venezuela, rather than conscious effort.
Now, since the start of the year Brent crude has crept up nearer to US$68 thanks to the Iran protests, and WTI has hit US$62 a barrel. This will certainly make it harder for those that can raise their production to resist doing just that, and since pipeline blasts cannot be scheduled—at least by the official authorities—the December decline may shrink at some point in the coming months, however fast Venezuela’s production falls.
There is already talk about prices being too high to continue rising: some analysts argue that after hedge funds and money managers accumulated a record-high number of bullish bets on the commodity, the only thing they can do going forward is to start selling. If that happens, OPEC would need to rein in the cheaters to keep the cut deal going.
By Irina Slav for Oilprice.com
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