OPEC Cuts Production, Warns of Risks to Oil Demand Growth
The Organization of Petroleum Exporting Countries warned Thursday that a difficult economic environment could significantly dent expectations for oil demand growth next year, as its monthly oil-market report showed the group's output fell in July to its lowest since February.
The group of oil-producing countries highlighted signs that emerging economies in Asia are beginning to flag. Economic growth in the region, particularly China, has been the main driver of oil-demand growth in recent years, OPEC said. A slow down there could have a larger impact on the oil market than economic difficulties that have already been felt elsewhere, it said.
OPEC's fears underscore how concerns have shifted recently from long-troubled Europe to the world's fastest-growing economies.
"The fear is that emerging Asia, as exhibited by the recent data, will worsen further in the second half of the year," OPEC said. "The economic picture is vague and the horizon full of turbulence," that could force the group to revise its current demand-growth forecast for 2013 down by as much as 20%, it said.
OPEC's own production is already falling and was down by 157,000 barrels a day last month to 31.2 million barrels a day, according to data from secondary sources compiled by OPEC analysts. This was due mainly to declines in Iranian, Saudi Arabian, Libyan and Angolan oil production.
The decline from these countries was offset in part by an increase of more than 100,000 barrels a day in Iraqi oil production, which topped 3 million barrels a day in July.
Iraq widened its oil-production lead over neighbor Iran, whose output fell by 173,000 barrels a day in July, the first month after the European Union imposed a full embargo on the country's oil.
Sanctions have hit Iranian production hard. Its July output was more than 800,000 barrels day lower that the average level in 2011, OPEC said.
Separate disclosures from OPEC members point to how the harsh sanctions imposed on Iran, designed to pressure the country over its nuclear program, have caused tensions within the group. Official output figures from Iran and Saudi Arabia, which is perceived to be filling the oil-production gap caused by sanctions, diverge particularly widely.
For many years, OPEC only included production estimates based on data compiled by independent oil consultancies in its monthly report. The recent addition of data submitted directly from group's members, which have long been considered less reliable than independent estimates, have muddied the water.
Official Saudi data said its production tumbled by 300,000 barrels a day, from 10.1 million barrels in June to 9.8 million barrels a day in July. , However, data compiled from secondary sources showed a much more modest decline in Saudi output last month of just 50,500 barrels a day, to 9.93 million barrels a day.
Official Iranian data claimed oil output of 3.8 million barrels a day in June, 766,000 barrels a day above the estimate from secondary sources and an increase of 200,000 barrels a day from the 2011 average.
Saudi Arabia increased production this year to near 30-year highs as Western sanctions dented oil exports out of Iran. A sharp drop in oil prices in the second quarter of the year gave rise to calls from other OPEC members for the kingdom to rein in production at the group's most recent meeting in June.
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