Excluding Iraq, whose production rose by only 10,000 b/d over the month, output from the ten members with quotas rose by a combined 220,000 b/d to 25.85-mil b/d, some 1.35-mil b/d more than the 24.5-mil b/d ceiling which came into effect in November, the survey showed.
"Never mind that OPEC was supposed to cut production," said John Kingston, global director of oil at Platts. "Demand is strong, prices are high, and Iraqi production is hardly gushing back into the market, which is what OPEC has feared. OPEC may be overproducing its quota, but it isn't overproducing demand, and that's what matters."
Just four countries -- Indonesia, Libya, Qatar and Venezuela -- reduced production in December. But their combined cuts totaled only 60,000 b/d, a volume dwarfed by the 290,000 b/d of increases from five countries -- Iran, Iraq, Nigeria, Saudi Arabia and the UAE.
The biggest single increase came from Saudi Arabia, which boosted output by 140,000 b/d to 8.45-mil b/d. Iran increased output by 40,000 b/d and Nigeria and the UAE by 50,000 b/d each.
Iraqi output rose by 10,000 b/d to average 1.9-mil b/d in December, the survey showed. Iraqi oil ministry adviser Thamer Ghadban told Platts January 8 that production was currently running at 2.3-mil b/d and rising. In a report to the US Congress last week, the White House said Iraqi production was expected to reach 2.5-mil b/d -- the level of its pre-war production as estimated by Platts -- in April.
The biggest single cut came from Venezuela, whose output fell 30,000 b/d from 2.58-mil b/d in November to 2.55-mil b/d in December.
Although OPEC's crude basket has spent 25 straight trading days above the $22-28/bbl target band, OPEC has opted not to exercise its option under OPEC rules to increase production. The so-called price band mechanism allows OPEC to release an additional 500,000 b/d of crude if the basket stays above the target price band for 20 consecutive trading days.
"What has been interesting about OPEC's recent behavior is that it seems to have tacitly moved its projected price band up to about $25-$30 from $22-$28," Kingston said. "Prices have been high enough over $28 for the OPEC basket that it was supposed to trigger increased production by the group, but it did not. That is an indication that the organization possibly sees the 'natural' level of prices as having taken a step higher."
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