OPEC crude production rose by 65k bpd in April to 31.78 mn bpd as higher output from Nigeria and Saudi Arabia more than made up for lower flows from Libya and Iran
OPEC crude production rose by 65 kb/d in April to 31.78 mb/d as higher output from Nigeria and Saudi Arabia more than made up for lower flows from Libya and Iran. The output from members bound by the six-month production deal edged higher, but average compliance remained robust at 96 per cent. Crude production was down 535k bpd compared to April 2016, the largest year-on-year (y-o-y) decline in nearly three years.
OPEC meets on 25 May to review output policy. Saudi Arabia and Russia favour extending supply cuts through Q1 of 2018 and are working to build a consensus before oil ministers meet in Vienna. In the meantime, data show OPEC is estimated to have earned more in Q1 of 2017 while pumping less. Supply fell by around 4 per cent versus a record-setting Q4 od 2016 while estimated daily revenue was up nearly 5 per cent.
Libya and Nigeria, exempt from OPEC cuts, have yet to challenge the supply pact with a substantial increase in output. Both, however, appear to be making a production comeback. On average from January through April, the two producers between them have added only 60k bpd compared to an October baseline. By mid-May, however, Libyan output had made an impressive recovery and Nigerian supply could get a boost after the restart of a key export terminal.
The IEA also report that the OECD commercial stocks decreased for a second straight month in March, by 32.9 mb (1.1mn bpd), to 3 025 mb. Product stocks fell sharply on lower refinery output and increased exports. For Q1 of 2017 as a whole, OECD stocks were up 24.1 mb (0.3mn bpd) due to a large build in January. Preliminary data suggests OECD stocks increased in April.
Benchmark oil prices fell after 11 April 2017 and traded close to their late November level, before the OPEC output deal. They rose on 15 May 2017 after Russia and Saudi Arabia indicated support for an extension of the production cuts. Sour grades continued to trade higher than sweet crudes.
In 2Q17, global refining activity slows down seasonally, lower by 370k bpd from 1Q17, but is set to ramp up by 2.4 mn bpd by JulyAugust. The OECD leads the way: in non-OECD areas, maintenance and refinery closures in the Middle East, underperformance in Latin America and flat growth in India are not offset by growth in China and Russia.
