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UBS Sees OPEC Production Falling This Month

Rigs

Analysts at UBS warned on Tuesday that OPEC’s crude oil production may fall this month—after having hit an eight-year-high in July—as attacks and growing unrest in Iraq, Nigeria and Libya may reduce their respective outputs.

In July, OPEC’s output went up by 150,000 b/d to 33.39 million b/d, as Saudi Arabia increased production to all-time highs and Iraq pumped more, figures by the International Energy Agency (IEA) show. OPEC itself said last week that Saudi Arabia had reported production of 10.67 million barrels per day, up by some 120,000 bpd on the prior month.

Looking to August data, UBS now expects Iraq’s production to decline after Islamic State fighters killed five people in an attack on the largest oil field in Kirkuk, Bai Hassan.

UBS analysts also see Nigeria’s production down this month, with no respite in militant attacks there.

Over the weekend, Petroleum Minister Ibe Kachikwu said that Nigeria’s losses in daily oil production due to militant attacks had hit 900,000 barrels.

UBS is not optimistic on increased Libyan output either, despite the de facto agreement to reopen key ports in the east. Earlier this month, Libyan militia Operation Dignity attacked the Zueitina oil terminal near Benghazi. The attack was repelled by Petroleum Facilities Guard forces, which are another militia operating in the country.

Related: What The Fall Of OPEC Means For Global Oil Markets

Since OPEC said it would hold an informal meeting on the sidelines of the International Energy Forum in Algeria on September 26-28, rumors and commentaries have been piling up on whether the cartel would take any action to support crude prices and agree on some sort of production freeze.

UBS sides here with the majority of analysts who do not expect a production freeze.

“Our view is that agreeing a freeze is likely just as difficult as in April…it's arguably not as needed … and likely has little effect on actual market balances, with most of OPEC running flat out and Saudi output seasonally ramping down by September after peak summer demand,” CNBC quoted UBS analyst Jon Rigby as saying in a report.

By Tsvetana Paraskova for Oilprice.com

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