Big­ger 2017 sur­plus as oil out­put jumps

Kuwait Times - - BUSINESS -

LON­DON: OPEC re­ported an in­crease in its oil pro­duc­tion in Oc­to­ber to a record high led by mem­bers hop­ing to be ex­empt from the pro­ducer group’s at­tempt to curb sup­ply, weigh­ing on prices and point­ing to a larger global sur­plus next year. The Or­ga­ni­za­tion of the Petroleum Ex­port­ing Coun­tries pumped 33.64 mil­lion bar­rels per day (bpd) last month, ac­cord­ing to fig­ures OPEC col­lects from sec­ondary sources, up 240,000 bpd from Septem­ber, OPEC said in a monthly re­port.

The OPEC fig­ures point to a big­ger sur­plus than those of the In­ter­na­tional En­ergy Agency and un­der­line OPEC’s chal­lenge in re­strain­ing sup­plies. Oil fell be­low $45 a bar­rel af­ter the re­port was re­leased, hav­ing reached a 2016 high near $54 af­ter OPEC’s deal was an­nounced in Septem­ber. OPEC made lit­tle men­tion of the sur­prise elec­tion of Don­ald Trump as the next US pres­i­dent, beyond not­ing that cur­rency markets had seen “sig­nif­i­cant” volatil­ity. It left un­changed its 2017 fore­casts for US and world eco­nomic growth.

“More data over the com­ing months will pro­vide fur­ther in­sight to al­low a more de­tailed re­view of the US eco­nomic sit­u­a­tion, par­tic­u­larly af­ter the most re­cent elec­tions,” OPEC said in the re­port. To speed up a rebalancing of the mar­ket, OPEC agreed at a meet­ing in Al­ge­ria on Sept 28 to cut sup­ply to be­tween 32.50 mil­lion bpd and 33.0 mil­lion bpd. The group hopes to fi­nalise fur­ther de­tails at a meet­ing on Nov. 30.

The lat­est fig­ures could com­pli­cate OPEC talks on how to share out the cuts. OPEC ex­perts meet to dis­cuss this on Nov 25 and on Nov 28 will meet of­fi­cials from non-OPEC coun­tries, OPEC Sec­re­tary Gen­eral Mo­hammed Barkindo said on Mon­day. Ac­cord­ing to OPEC’s re­port, Oc­to­ber’s sup­ply boost mostly came from Libya, Nige­ria and Iraq - mem­bers that have sought to be ex­empt from cuts due to con­flict. Iran, seek­ing an ex­emp­tion as out­put was held back by West­ern sanc­tions, also pumped more.

OPEC uses two sets of fig­ures to mon­i­tor its out­put - fig­ures pro­vided by each coun­try, and sec­ondary sources which in­clude in­dus­try media. This is a legacy of old dis­putes over how much coun­tries were re­ally pump­ing. Iran told OPEC it pro­duced 3.92 mil­lion bpd in Oc­to­ber, while the sec­ondary sources put out­put at 3.69 mil­lion bpd. From Iran’s point of view, join­ing the OPEC sup­ply cut deal from the higher fig­ure would be more favourable.

OPEC is­sued a re­vised re­port on Fri­day to add Iraq’s fig­ure. Bagh­dad, which has ques­tioned the ac­cu­racy of the sec­ondary-source num­bers, told OPEC its Oc­to­ber out­put was steady at 4.77 mil­lion bpd - 210,000 mil­lion bpd more than the sec­ondary sources es­ti­mate. That aside, OPEC’s re­port is the lat­est to show out­put is hit­ting new peaks. The Oc­to­ber fig­ure is the high­est since at least 2008, ac­cord­ing to a Reuters re­view of past OPEC re­ports.

In the re­port, OPEC trimmed its forecast of non-OPEC sup­ply this year, al­though sup­ply growth in 2017 is put at 230,000 bpd, lit­tle changed from last month. With de­mand for OPEC crude in 2017 ex­pected to av­er­age 32.69 mil­lion bpd, the re­port in­di­cates there will now be an av­er­age sur­plus of 950,000 bpd if OPEC keeps out­put steady. Last month’s re­port pointed to an 800,000 bpd sur­plus. The 2017 sur­plus im­plied by the IEA in its lat­est re­port on Thurs­day is closer to 500,000 bpd.

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