The Organization of Petroleum Exporting Countries (OPEC) cut oil production by 221,000 barrels per day in the last month of 2016, bringing the bloc’s total output to 33.08 million bpd by the end of December, according to the group’s latest report released on Wednesday.
With domestic oil sectors just recovering from years of civil strife, Iraq and Libya upped their output to pay for the reconstruction of their countries as they regain former stability. For the month of December, Libya increased oil production from 577,000 barrels per day in November to 608,000 barrels per day, based on secondary sources.
Iraq, who has contested the use of secondary source figures, produced 4.63 million barrels per day in December, up from 4.59 million barrels per day in November. Home to the second largest oil reserves in OPEC, Iraq has obligations to supermajor international oil companies, and must contend with production from the Kurdistan Regional Government (KRG) as well. The KRG may or may not play along with the cuts.
Angola also ramped up production after experiencing a sizable dip in October, but its December figure standing over 1.7 million brings the African nation back to regular highs.
In contrast, Saudi Arabia, Nigeria and Venezuela saw the largest declines – surprisingly. As the de facto leader of OPEC, Saudi Arabia has been expected to take on the burden of 40 percent of the planned cuts. For December, Saudi Arabia produced 10.47 million barrels per day, down from 10.62 million barrels per day in November. Related: The Rebound Is Here: Megaprojects Back On The Table
Nigeria’s militant crisis has led output to decline up to 50 percent at its worst. The Niger Delta Avengers and related groups demand that profits from oil production be used to develop the areas from which the resource is extracted. Nigeria’s production for December was 1.54 million barrels per day, down from 1.66 million barrels per day in November.
Venezuela, at 2.02 million barrels per day, has had to open up its borders with neighboring Colombia – a country that has been blamed for drug crises and violence in the domestic political circle.
The Saudis are keen to show that they are listening to the market, and they are also hoping to lead by example and get other OPEC and non-OPEC members to follow suit. The Kingdom said that it is planning even deeper cuts in February, in order to increase global confidence in its upcoming IPO of Saudi Aramco.
The Saudis produce medium and heavy crude, and in order to both take the sting out of cuts in terms of revenue and simultaneously help balance the market, the Kingdom will cut production of its heavy crude, which is less profitable thanks to the spread between light and heavy crude widening significantly over the past couple of years.
Overall, OPEC production for the month of December came in at 33.08 million barrels per day compared to 33.31 million barrels per day in November.
Global oil supply dropped 0.30 million barrels per day in December, averaging 96.92 million barrels per day for the month, but increasing by 710,000 barrels per day year over year.
By Zainab Calcuttawala for Oilprice.com
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