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Oil Prices Rise As OPEC Oil Production Declines In August

OPEC’s crude oil production declined in August thanks to Saudi Arabia cutting more from its production, a person familiar with the figures told Bloomberg, adding the information came from four of six secondary sources that track the production rates of the cartel’s members.

OPEC produced 30.004 million barrels daily last month, the source said, versus 30.113 million bpd in July, with Saudi Arabia, the group’s leader and biggest producer, reducing output to 10.022 million bpd, from 10.049 million bpd in July. The Kingdom’s own data is, as often happens, more positive than that, suggesting an average output of 9.95 million bpd.

The news comes on the heels of a statement from Riyadh that Oil Minister Khalid al-Falih had discussed the possibility of another extension of the 1.8-million bpd production agreement between OPEC and 11 other producers beyond the March 2018 deadline.

The initial OPEC-non-OPEC agreement pushed Brent prices up to almost US$57 a barrel and WTI to over US$54 a barrel in January this year, but since then, the benchmarks have been sliding down, with a few notable interruptions of the trend thanks to supply disruptions and the May decision to extend the cuts beyond the original deadline of June 30, 2017.

Related: The U.S. Oil Patch Has A Serious Cybersecurity Problem

A growing number of analysts, however, are of the opinion that OPEC is digging itself into a deeper hole the more it extends the production cuts. Lower output from the cartel’s members means lower exports and, consequently, lower crude oil revenues. It is also costing them market share to rivals, including partner Russia and the U.S.

At the same time, prices have stubbornly stayed around US$50 a barrel after the initial spike, in large part thanks to growing output from the two exempted OPEC members, Nigeria and Libya. OPEC has invited both to its upcoming monitoring meeting on September 22. The pressure to put a limit on Nigeria’s production could rise ahead of the official meeting at the end of November.

By Irina Slav for Oilprice.com

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