While the OPEC secondary sources said Saudi output fell in February to 9.797 million bpd, Saudi Arabia reported to OPEC that it increased to 10.011 million bpd – which would still be in line with its OPEC output target. Shale activity in the US has offset the positives that came out of the OPEC deal, John Love, president and CEO of USCF, which runs United States Oil, told IBD recently.
OPEC recently agreed to reduce output – for the first time in eight years – as part of efforts to clear a glut of oil and push up prices.
Oil prices were put under further pressure at the end of last week, when energy services firm Baker Hughes reported U.S. drillers added oil rigs for the eight consecutive week.
OPEC countries chose to curb its production by 1.8 million barrels in the first half of 2017. Shale producers, after being forced to cut production and costs by the oil crash, continue to demand rigs from service providers to increase output.
While Saudi Arabia remained the biggest oil supplier to India, ship tracking data and a report compiled by Thomson Reuters Oil Research and Forecasts showed imports from Iran rose to 647,000 barrels per day (bpd) in February.
Crude oil futures fell again overnight for a 7th session, taking the loss so far this month to 12% (to a trading low of $US47.07 a barrel for the United States style crude) as fears continue about the impact of rising U.S. production, and the looming rate rise from the Fed.
Overall, increased US oil production continues to counter OPEC rebalancing efforts. Divides within Opec could also emerge as both Iraq and Iran have indicated they are ready to ramp up output in the second half of the year. Its energy ministry reiterated the country’s commitment to “stabilizing the global oil market”. Among the most surprising things was the involvement of Russian Federation, traditionally an outsider that refused to cooperate with OPEC.
OPEC is also taking a more confident view that world demand for oil will increase in 2017 as global economic growth recovers. While Opec compliance continued to improve during February, it was the upward revision to non-Opec production and not least Saudi production levels which had traders hitting the sell button once again.
Opec’s relentless production late in 2016 is to blame for a jump in stockpiles for the first time in six months and a backlog of unused oil, the International Energy Agency said on Wednesday.