The Organization of the Petroleum Exporting Countries (OPEC) increased crude oil production by 300,000 barrels per day (b/d) to 28.39 million b/d in May, according to a just-released Platts survey of OPEC members, oil industry officials and analysts. This is an increase from 28.09 million b/d in April.
Production had already risen in April for the first time since August 2008. According to the May production estimate OPEC-11 (those bound by production quotas) is at only 72% compliance with its 4.2 million b/d in crude output cuts agreed late last year. This is down from 78.7% compliance in April and 81.8% in March.
May production increases totaling 320,000 b/d from Angola, Iran, Nigeria, Qatar, Saudi Arabia, the UAE and Iraq were slightly offset by a 20,000 b/d decline in Venezuelan output.
"With the recent increases in crude oil prices, the drumbeat that we're on our way back to $100-per-barrel-oil has been growing louder," said John Kingston, Platts global director of oil. "But this month's surge in output shows that OPEC has a lot of productive capacity that it can bring on the market relatively quickly, and that should certainly prove a hurdle to any move back to three-digit oil prices."
Before April, OPEC production had fallen steadily in response to the plunge in oil demand caused by the global economic recession. OPEC-11 output failed to drop to this year's 24.845 million b/d target. The latest estimates leave the OPEC-11 some 1.14 million b/d in excess of this target.
Although seven countries increased production in May, the bulk of overproduction occurred in Angola, Iran and Venezuela. Saudi Arabia, despite having boosted production by 110,000 b/d between March and May, was within its quota.
Initial output cuts by the OPEC-11 subject to the ceiling for 2009 were sizeable--970,000 b/d between December 2008 and January 2009 and 820,000 b/d between January and February. OPEC is next scheduled to meet in September.
Crude futures prices have been on a broadly upward trend since mid-February, and according to some observers, this may have encouraged over-quota production. OPEC's own basket of crudes, for example, stood at $38.14 per barrel on February 19. On June 11, the basket stood at $70.87 per barrel.