Excluding Iraq, which does not participate in OPEC output accords, OPEC 10 production averaged 26.06-mil b/d in March, 30,000 b/d higher than their combined February output of 26.03-mil b/d and 1.56-mil b/d more than the 24.5-mil b/d ceiling which was superseded at the beginning of April by a new, lower ceiling of 23.5-mil b/d.
Including Iraq, total OPEC production rose by 470,000 b/d to 28.4-mil b/d in March from 27.93-mil b/d in February, the survey showed. Higher Iraqi volumes accounted for the bulk of the 470,000 b/d increase.
"We haven't seen any cuts in March, and with prices still high, that's not surprising," said John Kingston, global director of oil at Platts. "The question now is whether we will see any substantial drop in output in April, given the rise in Iraqi production and OPEC's concerns about falling demand in the second quarter."
Ministers vowed at their February 10 meeting in Algiers to slash more than 1.5-mil b/d of overproduction over the following month-and-a-half before the planned April 1 implementation of the 1-mil b/d cut in quotas agreed at that meeting. But the survey showed overproduction at 1.56-mil b/d in March, which means that OPEC will need to reduce output by more than 2.5-mil b/d if it is to meet its new 23.5-mil b/d ceiling, which came into effect at the beginning of April.
Only two countries produced within quota in March: Indonesia, whose production has been in decline for some time and which underproduced its quota by 238,000 b/d; and Venezuela, whose output has not managed to recover to levels seen before the two-month strike in the winter of 2002-2003 and which underproduced its quota by 164,000 b/d.
The survey pegged Iraqi production at 2.34-mil b/d in March, up 440,000 b/d on the previous month as exports from the south, hit by bad weather in February, recovered and export capacity increased with the use of the Khor al-Amaya terminal.
March also saw 6-mil bbl of Iraqi Kirkuk crude exported from Ceyhan on the Turkish Mediterranean. Sold by tender, the six cargoes were the first Iraqi crude exports from Ceyhan since Iraqi state oil marketer SOMO in June 2003 sold crude pumped to the Turkish port before the US invasion last March and stored there.
Among the ten members bound by quotas, Indonesia, Iran and Saudi Arabia reduced their volumes by a combined 60,000 b/d., but this was more than offset by increases totaling 90,000 b/d from Kuwait, Nigeria and the UAE. Nigerian production averaged 2.4-mil b/d, its 60,000 b/d month-on-month output increase largely due to rising production from the Total-operated Amenam/Kpono deepwater development which came on stream last July and already is pumping 98,000 b/d.
Meeting in Vienna on March 31, OPEC rubber-stamped the Algiers agreement to cut by 1-mil b/d from the beginning of April. But April is not expected to show a dramatic decrease in output, with few member countries indicating substantial cutbacks in April allocations to their customers.
Oil prices remain relatively high. OPEC's own basket of crudes, which stood at $31.32/bbl on April 7 and which averaged $28.10/bbl in 2003, has now been above the cartel's $22-28/bbl target band for 87 consecutive trading days. OPEC has done little to bring prices back into the target band; however, citing the depreciation of the US dollar in which their oil exports are priced, blaming the high prices on geopolitics and speculative activity on futures markets, and warning that production needs to be scaled back rather than increased so as to avert a price collapse in the second quarter when oil demand tends to drop.
Nevertheless, senior OPEC officials such as Saudi Arabia's Ali Naimi, oil minister of the cartel's most powerful producer, have gone to some trouble to reassure leading oil consuming countries that OPEC will not allow an oil shortage to develop.
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