OPEC Supply Falls to 2 1/2-Year Low, Below Demand Forecast

Jan 16, 2014 12:23 pm ET

(Updates Libyan output in sixth paragraph.)

Jan. 16 (Bloomberg) -- OPEC oil production fell to the lowest level since May 2011, while the organization forecast demand for its crude this year will remain below the group’s agreed output target.

The Organization of Petroleum Exporting Countries, responsible for 40 percent of the world’s oil, said that supply from its 12 members slid by 20,000 barrels a day to 29.44 million a day in December amid declines in Iraq and Saudi Arabia. That’s less than the average of 29.6 million a day the group predicts will be required in 2014 and below the 30 million ceiling it reaffirmed in December.

“Lower overall Iraqi production in the past couple of months resulted from a combination of factors, including limited export capacity out of Basra due to maintenance, halting of field operations due to security conditions, protests and some interruptions in northern exports,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London.

Brent crude futures have slipped 3.6 percent this year, trading at $107 a barrel in London today, the worst start to any year since 2008, amid speculation that demand will remain constrained while shale output from North America climbs, and as political tensions in the Middle East diminish. Iraq’s exports have been curtailed due to maintenance at terminals in the south and protests at oilfields in the area.

Biggest Drop

OPEC’s output has fallen to the lowest level since the 2011 uprising against former Libyan leader Muammar Qaddafi all but halted exports from the North African country. The biggest drop in December production was in Iraq, which fell by 55,000 barrels a day to 2.98 million, followed by Saudi Arabia, which declined by 31,400 a day to 9.62 million barrels a day.

Output from Libya, which has been paralyzed by protests at oilfields and export terminals, was unchanged in December, at 261,000 barrels a day, or about 20 percent of capacity, the report showed. The country’s production has subsequently rebounded following the restart of the Sharara field, and reached 570,000 barrels a day yesterday, state-run National Oil Corp. said today.

Production in Iran, which agreed in November to curtailing its nuclear program in return for some easing of international sanctions, rose by 20,000 a day to 2.73 million a day last month, the data showed. Europe is days from suspending a ban on reinsurance for tankers hauling Iranian oil, a measure that helped cut crude exports from the country by more than 50 percent, the International Group of P&I Clubs said today.

Output Limit

Global oil demand will increase by 1.05 million barrels a day, or 1.2 percent, next year to average 90.9 million a day, according to the report. Producers outside OPEC, led by the U.S., Canada and Brazil, will increase supplies by 1.27 million to 55.38 million, according to the report. As a result of supply expansion in these countries, the need for OPEC’s crude will decline this year by 300,000 barrels a day compared with 2013.

OPEC decided to maintain its output limit of 30 million barrels at a meeting in Vienna last month because members were “all satisfied,” Ali al-Naimi, Saudi Arabia’s oil minister, told reporters on Dec. 4. OPEC will next meet on June 11. The Gulf kingdom is the group’s largest member and de facto leader.

Total inventories of crude and refined products in the world’s most advanced economies were about 31.4 million barrels below their five-year average in November, after dropping by 27.5 million barrels to 2.7 billion barrels, according to OPEC.

The International Energy Agency, the Paris-based adviser to oil-consuming nations, will release its monthly report with forecasts of supply and demand on Jan. 21.

OPEC’s 12 members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the U.A.E. and Venezuela.

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--Editors: Raj Rajendran, John Deane