The 12 members of the Organization of the Petroleum Exporting Countries (OPEC) pumped an average 28.09 million barrels per day (b/d) in April, the first rise in volumes since August 2008, according to a Platts survey of OPEC members, oil industry officials and analysts just released. This is an increase of 110,000 b/d from March.
Production from the 11 OPEC members bound by quotas rose 130,000 b/d to 25.74 million b/d in April from 25.61 million b/d in March. Iraq, which is struggling to rebuild its oil sector, does not participate in output agreements.
"It isn't surprising that as prices rise steadily, OPEC's adherence to its production restraints is weakening," said Platts Global Director of Oil John Kingston. "The markets are sending out mixed signals which will confuse things further. Rising prices are saying more output is necessary, while continuing inventory builds signal the opposite. These contrasting forces will certainly be on the agenda when OPEC meets May 28."
Production increases totaling 180,000 b/d from Angola, Iran, Kuwait, Nigeria and Saudi Arabia were partly offset by 70,000 b/d of decreases from Algeria, Ecuador, Libya, the United Arab Emirates (UAE) and Iraq.
Saudi Arabia, Iran and Kuwait each increased output by 50,000 b/d. But while the survey showed higher oil production volumes from Saudi Arabia, the kingdom was well within its presumed target of 8.014.
OPEC production has fallen steadily in recent months as the group has responded to the plunge in oil demand caused by the global economic recession. However, OPEC-11 output has not dropped so far as to reach the 24.845 million b/d target which came into effect on January 1 this year.
The latest estimates leave the OPEC-11 some 895,000 b/d in excess of their target. Compliance with the 4.2 million b/d cut--a combination of three reductions in the second half of last year--agreed in December had risen to 81.79% in March but fell back to 78.69% in April.
Initial output cuts by the OPEC-11 under the December agreement were sizeable--970,000 b/d between December and January and 820,000 b/d between January and February. But between February and March, volumes dropped by just 110,000 b/d.
With crude oil futures prices have trended higher since mid-February, some observers believe pricing have encouraged so-called "leakage," or production beyond quota. The price of OPEC's own basket of crudes stood at $38.14 per barrel (/b) on February 19. On May 11 it stood at $56.11/b. In early trading on May 12, front-month U.S. light crude oil futures broke above $60/b for the first time since November last year.
OPEC, which last met in mid-March, is scheduled to meet on May 28 in Vienna. Algerian oil minister Chakib Khelil said on May 11 that he would prefer to see the group enforce stricter discipline rather than consider a new production cut. He said that if all members adhered to their production targets, a further 600,000 to 700,000 b/d would be removed from the market. But Iran's OPEC governor, Mohammad Ali Khatibi, said May 12 that rising consumer stockpiles make a new supply cut necessary.
OPEC is scheduled to release on May 13 its monthly oil market report, with updated projections of global oil supply and demand and demand for its own crude. In its April report, OPEC reduced its 2009 estimate of demand or "call" on its own crude--including Iraqi volumes-- to 28.74 million b/d, down from a previous figure of 29.07 million b/d.