OPEC Output Up 250,000 Barrels Per Day in March

Continued high oil prices ensured that OPEC crude production rose again in March with overall output climbing 250,000 b/d to 29.83 million barrels per day (mil b/d) from 29.58-mil b/d, a Platts survey of OPEC and oil industry officials showed April 7. Production by the ten members with quotas -- Iraq does not have one -- also rose 250,000 b/d, to 27.98-mil b/d from 27.73-mil b/d in February.

The survey showed that OPEC-10 production in March exceeded by around half a million barrels per day the new 27.5-mil b/d ceiling agreed at the group's March 16 meeting in Isfahan, Iran, when ministers adopted a Saudi proposal for an immediate 500,000 b/d increase, and was already within a whisker of the 28-mil b/d that will be the group's new ten-member ceiling if a further 500,000 b/d increase currently under discussion is implemented.

"Not all barrels are equal, and while the world certainly needs the additional output from OPEC, the increase is almost certainly close to 100% sour barrels," said John Kingston, global director of oil at Platts. "These crudes generally have a lower gasoline yield, which is less favorable for the market as we move into the heavier gasoline demand season. So the increase will certainly be welcomed by consumers, but these barrels are going to sell for less than $50, and there's a reason for that."

OPEC kingpin Saudi Arabia, which boosted its output by 150,000 b/d to 9.4-mil b/d, provided the biggest single output increase in March. Iranian output rose by 50,000 b/d to 3.98-mil b/d. Other smaller increases totaling 110,000 b/d came from Algeria, Kuwait, Libya and Venezuela. Nigerian, Qatari and UAE production were unchanged from February levels. Indonesian production drifted down to 950,000 b/d. Iraqi output was roughly unchanged at 1.85-mil b/d.

OPEC's steadily rising production means that most member countries are moving close to their output capacity limits, with only Saudi Arabia -- which says it is capable of producing 11-mil b/d but that the market does not currently need this much oil -- having any significant volume of surplus capacity. Indeed, the survey shows that Indonesia and Venezuela are jointly under-producing their new output quotas by close to 1-mil b/d.

Unwilling to tackle the highly political issue of quota redistribution, OPEC has continued to apply any output adjustments on a pro rata basis, a policy that has resulted in Indonesia's March output averaging out at 475,000 b/d below its new 1.425-mil b/d quota and Venezuelan output 465,000 b/d below its 3.165-mil b/d quota. An additional 500,000 b/d hike in the ceiling will make the disparity even more glaring for those two countries.

OPEC president and Kuwaiti oil minister Sheikh Ahmed Fahed al-Sabah said April 4 he had already initiated consultations with other OPEC ministers on whether to implement the 500,000 b/d additional increase provided for by the Isfahan meeting. Sheikh Ahmed said it was his personal view that OPEC should go head with the increase as soon as possible. International oil prices climbed to new all-time highs Monday, when US light crude futures soared to $58.28/bbl and North Sea Brent to $57.65/bbl but have since eased back to between $56 and $57/bbl.

Country-by-country breakdown of production with figures in millions of b/d:

    Country   Mar 05   Feb 05   Jan 05    Dec 04    Nov 04    Quota  Old Quota
    Algeria    1.300    1.290    1.290     1.290     1.280    0.878    0.862
    Indonesia  0.950    0.960    0.960     0.960     0.950    1.425    1.399
    Iran       3.980    3.930    3.900     3.900     3.950    4.037    3.964
    Iraq       1.850    1.850    1.850     1.840     1.800     N/A      N/A
    Kuwait     2.450    2.430    2.400     2.420     2.420    2.207    2.167
    Libya      1.620    1.610    1.610     1.630     1.610    1.473    1.446
    Nigeria    2.350    2.350    2.300     2.280     2.380    2.265    2.224
    Qatar      0.780    0.780    0.780     0.800     0.800    0.713    0.700
    Saudi      9.400    9.250    9.100     9.500     9.500    8.937    8.775
    UAE        2.450    2.450    2.400     2.480     2.480    2.400    2.356
    Venezuela  2.700    2.680    2.700     2.650     2.650    3.165    3.107
     Total    29.830   29.580   29.290    29.750    29.820     N/A      N/A
    OPEC 10
     Iraq)    27.980   27.730   27.440    27.910    28.020   27.500   27.000