OPEC pro­duc­tion rises 1.2% to 32.6mn bpd in June

Muscat Daily - - BUSINESS -

▶Global oil sup­ply in­creased by 660,000 bpd to 96.59mn bpd in June 2017

▶OPEC pro­duc­tion in­creased by 1.2 per cent month-on­month dur­ing June to 32.6mn bpd

▶Prod▶ction of non-OPEC coun­tries who agreed on cut­ting the out­put rose by 0.5 per cent

▶O▶tp▶t cut com­pli­ance dropped to 92.2 per cent in June, sec­ond low­est af­ter 88.4 per cent in Jan­uary

The OPEC pro­duc­tion in­creased by 1.2 per cent on monthly ba­sis dur­ing June to 32.6mn bar­rels per day (bpd) com­pared to 32.2mn bpd in May. The rise in OPEC pro­duc­tion was largely be­cause of in­crease in oil pro­duc­tion by Libya, Nige­ria, Iraq and An­gola. Amongst the Or­gan­i­sa­tion of Opetroleum Ex­port­ing Coun­tries, the coun­tries which agreed on out­put cut wit­nessed a pro­duc­tion rise of 0.5 per cent to 26mn bpd in June com­pared to 25.9mn bpd in the pre­vi­ous month. Venezuela and Gabon were the only coun­tries within the bloc which wit­nessed a drop in out­put while all other twelve mem­bers wit­nessed a pro­duc­tion rise.

The share of OPEC crude oil in to­tal global pro­duc­tion slightly in­creased by 0.2 per­cent­age point to 33.8 per cent in June com­pared with the pre- vi­ous month at 33.6 per cent.

Glob­ally, oil sup­ply in­creased by 660,000 bpd to av­er­age 96.59mn bpd in June 2017, com­pared with the pre­vi­ous month.

The in­crease of non-OPEC sup­ply (in­clud­ing OPEC NGLs) by 270,000 bpd mainly driven by Canada pro­duc­tion re­turn­ing from the wild­fire as well as OPEC crude oil pro­duc­tion by 370,000 bpd in June led to an in­crease in global oil out­put.

Global oil de­mand

Global oil de­mand growth in 2017 is ex­pected to be around 1.27mn bpd, broadly un­changed from pre­vi­ous month, to av­er­age 96.4mn bpd. The lat­est data shows de­mand in In­dia and China have re­mained ro­bust, re­flect­ing healthy man­u­fac­tur­ing and road con­struc­tion ac­tiv­i­ties in the former, and ris­ing de­mand in the trans­porta­tion and in­dus­trial sec­tors in the lat­ter.

For 2018, the world oil de­mand is an­tic­i­pated to rise by 1.26mn bpd, slightly be­low the cur­rent year’s growth, to av­er­age 97.6mn bpd.

US oil rig count

Ac­cord­ing to Baker Hughes’ lat­est sur­vey, for the week end­ing July 7, to­tal US rig count in­creased by 12 rigs week-on­week to 952 units. This in­cludes ad­di­tional five gas rigs, tak­ing the to­tal num­ber to 189 units, and seven oil rigs, tak­ing the to­tal to 763 units. This means that the US oil rig count has risen by 512 year-on-year.

To­tal US oil rig count in June was at 750 rigs, an in­crease of 32 rigs on monthly ba­sis, and up by 412 rigs on year-on-year ba­sis. In terms of drilled but un­com­pleted (DUCs) wells, 176 wells were added to the in­ven­tory in May, the sixth straight monthly in­crease. The US to­tal now stands at 5,946 DUCs, up from a post-down­turn low of 4,913 in Novem­ber 2016. Op­er­a­tors started build­ing up an in­ven­tory of DUCs in 2014 as oil prices col­lapsed.

Out­look

Given high level of in­ven­tory in the US, in­creas­ing rig count, re­vival of pro­duc­tion in war torn ar­eas like Libya and Iraq, tech­no­log­i­cal ad­vance­ments and cost op­ti­mi­sa­tion in the field of clean en­ergy and ad­vance­ments in the shale oil ex­trac­tion pro­ce­dures, we be­lieve oil prices are ex­pected to re­main low in the short to medium term.

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