LONDON (Dow Jones Newswires), Aug. 11, 2009
The Organization of Petroleum Exporting Countries Tuesday said its members' oil production increased for a fourth straight month in July above the group's production target.
The increase, a bearish signal for crude prices, highlights the rising amount of crude various OPEC members are putting into the global market at a time when world oil demand is fading due to the end of the northern-hemisphere summer, the peak driving season.
In its monthly oil market report, OPEC said output from its 11 members bound by production quotas rose by 105,000 barrels a day last month. The rise came from an unexpected increase in production from Saudi Arabia, the world's largest oil exporter.
Since April, those members -- many of which are trying to secure more oil revenue to keep state finances together amid the global recession -- have boosted production by about 420,000 barrels a day despite OPEC formally keeping in place big output reductions announced last year.
The group's adherence with a series of output cuts announced in late 2008 fell to 68% in July from just over 80% early this year. OPEC, which is scheduled to meet Sept. 9. in Vienna to review its output policy, is producing almost 1.4 million barrels a day above its production target.
While the latest compliance level is still decent by historical OPEC standards, the increased crude hitting the market comes amid lingering uncertainty about the health of crude demand when the recession ends.
China is showing firmer signs of economic revival but the U.S., the world's biggest oil consumer and economy, continues to register a mix of positive and negative economic data.
At the same, inventory of crude and oil-products such as diesel are still brimming at multiyear highs in places like the U.S. despite OPEC's nearly year-long effort at cutting production to reduce the overhang and prop up prices.
So far, the excess supply hasn't worried oil traders, many of whom have bid prices higher on expectations that oil demand, led by China, is on the path to recovery.
Oil prices in New York traded 20 cents lower at about $70.80 a barrel at around 1130 GMT. Current prices are about double the levels that crude traded for in December.
In its report, OPEC left its 2009 demand forecast unchanged from July, calling for consumption to fall by 1.65 million barrels a day to just under 84 million barrels a day. Demand is expected to recover next year with expectations for growth of 500,000 barrels a day led by China, OPEC said.
Copyright (c) 2009 Dow Jones & Company, Inc.
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