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Saudis Say Eased Output Cuts In February, Oil Prices Drop

OPEC Flag

While OPEC’s secondary sources placed Saudi Arabia’s February crude output further dropping to 9.797 million bpd, the Saudis self-reported output was back to above 10 million bpd – still cutting deeper than promised in the deal – but easing curtails, sending oil prices down after OPEC’s Monthly Oil Market Report was released on Tuesday.

As of 8:53 AM (EST), WTI Crude was trading down 1.4 percent at $47.72, while Brent Crude was down 1.11 percent at $50.78.

According to OPEC’s secondary sources, the cartel’s crude oil production in February decreased by 139,000 bpd from January to average 31.96 million bpd last month, with crude output rising the most in Nigeria, while production in Saudi Arabia, Iraq, UAE and Angola showing the largest declines.

However, according to the figures the cartel’s members provide to OPEC, Saudi Arabia’s output jumped by 263,300 bpd to 10.011 million bpd, although still below the 10.058 million bpd ceiling it had pledged in the deal. This could be a sign that the Saudis may not be willing to make up for fellow members who are less compliant any longer.

According to both OPEC secondary sources and direct communication from member countries, Iraq is still above its ceiling of 4.351 million bpd output, at 4.414 million bpd as per secondary sources, and 4.566 million bpd self-reported output. Also exceeding (even if slightly) their output ceilings are Algeria, Ecuador, the UAE, and Venezuela. UAE’s non-compliance is considered a surprise by analysts, most of whom had expected full compliance from the country, being a close ally of Saudi Arabia that usually leads the cuts.

Related: Falling Oil Prices Could Upend The OPEC Deal

Elsewhere, outside the cartel, OPEC now expects non-OPEC oil supply to grow by 400,000 bpd to average 57.74 million bpd, an upward revision of 160,000 bpd from its February report, due to higher expectations for output in Canada, the U.S. and Russia.

“It seems that the oil supply recovery is gathering momentum in the world oil market, stimulated by gradually rising prices as well as improvements in drilling efficiency and well productivity in North America,” OPEC said, in a sign that the cartel’s efforts to curb supply and balance the market may not be enough. U.S. oil production in 2017 has been revised up by 100,000 bpd to now show growth of 340,000 bpd, OPEC said.

By Tsvetana Paraskova for Oilprice.com

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