Crude oil supply from member countries of the Organisation of Petroleum Exporting Countries (OPEC) sank to a four-year low in March, a Reuters survey found, as top exporter Saudi Arabia over-delivered on the group’s supply-cutting pact while production from Venezuela fell further due to sanctions and power outages.
The Reuters’ survey Monday indicated that the 14-member cartel pumped 30.40 million barrels per day (mbd) of oil last month – March, down by 280,000bd from what they produced in February.
The survey, which THISDAY got in Abuja, also stated that the output level was the lowest OPEC total since 2015.
It further suggested that Saudi Arabia and its Gulf allies were pressing ahead with even larger supply cuts than was called for by OPEC’s latest deal, shrugging off pressure from U.S. President Donald Trump to increase supply. On Thursday, Trump again called for OPEC to pump more oil to lower prices.
The Reuters’ survey also said that crude oil was trading above $68 a barrel, close to a 2019 high. It added that this was boosted by the Saudi move and involuntary supply curbs in Venezuela and Iran, which are both under U.S. sanctions.
“The will is there to bring global oil inventories lower,” the Reuters quoted Tamas Varga of oil broker PVM to have said, referring to OPEC strategy.
Varga, further stated: “Unless there is a sudden jump in OPEC production or a complete breakdown in the U.S.-China trade talks, financial investors will find oil attractive to pour more money into.”
Accordingly, OPEC, Russia and other non-members in an alliance known as OPEC+, agreed in December 2018, to reduce supply by 1.2 million bpd starting from January 2019. OPEC’s share of the cut is 800,000bpd, to be delivered by 11 members except Iran, Libya and Venezuela.
The survey indicated that in March, the 11 OPEC members bound by the new agreement achieved 135 per cent of pledged cuts, up from 101 per cent achieved in February and a high rate by OPEC standards.
It stated that among the exempted producers, Venezuelan supply fell by 150,000bpd as power cuts hit its exports, adding to the impact of U.S. sanctions on state oil company, PDVSA and a long-term decline in production.
It added that the latest OPEC+ deal came just months after the group agreed to pump more oil, which in turn partially unwound their original supply-limiting accord that took effect in 2017.
According to it, the biggest drop in supply came from Saudi Arabia, OPEC’s biggest producer, which pumped 220,000bpd less than in February.
The survey showed that Saudi Arabia reduced production from a record 11mbd in November due to concern about a potential glut, adding that the second-biggest drop occurred in Venezuela which Washington imposed sanctions on state oil firm PDVSA in January, and blackouts halted operations at the country’s main oil export terminal of Jose and at crude upgrading plants.
Some sources in the survey however put Venezuelan production in March as low as 650,000bpd, but export data suggested that supply to the market did not fall this low as shipments pointed to 800,000bpd or more despite stoppages.
Output in Venezuela, once a top-three OPEC producer, has been declining for years due to economic collapse, the survey further explained.
It said Kuwait and the United Arab Emirates also delivered larger cuts than required under the deal, while Iraq, a laggard on compliance in the last round of cuts, reduced supply as exports from the country’s south fell.
OPEC’s biggest production gain however occurred in Libya as the country’s biggest oilfield, El Sharara, restarted, while among OPEC countries in the supply pact, Nigeria overproduced by the largest amount with the start-up of Total’s Egina field which helped boost the country’s output.
It however explained that Nigeria said the Egina field produces condensate, a type of light oil excluded from the OPEC cuts, while smaller producers such as Congo; Ecuador; Equatorial Guinea; and Gabon also pumped above their targets.
“March’s output is the lowest by OPEC since February 2015, excluding membership changes since then,” the Reuters surveys noted, adding that its aim was to track supply to the market based on shipping data provided by external sources, Refinitiv Eikon flows data and information provided by sources at oil companies, OPEC and consulting firms.