Opec’s oil output last month was at its highest in more than two-and-a-half years and continues to run ahead of demand growth, the International Energy Agency said in its latest monthly market report.
The IEA noted that oil production in the US declined but was more than offset by the rise in Opec output.
“Despite slowing US [light, tight oil] output, global oil supply growth remained at a steep 3.2 million barrels per day, year-on-year, in April,” the Paris-based think tank said in its latest monthly report.
Opec supply was up 160,000 bpd in April at 31.2 million bpd – the highest since September 2012, and nearly 1.4 million bpd above the same time last year, IEA estimates.
Despite the oil price slump slowing growth in oil production outside of Opec, the IEA said it now expects non-Opec growth to be 200,000 bpd higher than previously expected for the whole of this year, at 830,000 bpd.
That means its forecast demand for Opec oil for the second half of the year is 30 million bpd, meaning production is currently running 1.2 million bpd above expected demand.
“We expect [Opec] to keep production around this level for the next year,” said Tom Pugh, commodities economist at Capital Economics. “But high stock levels and Opec supply mean that even when demand picks up more strongly, the market should remain well supplied.”
Mr Pugh said oil prices are more likely to fall from levels reached in recent weeks, when benchmark North Sea Brent prices rose to their highest levels this year, at near US$68 per barrel, up more than $20 per barrel from the lows in February.
Extra Opec oil supply in April came mainly from Iraq and Iran, which each added about 100,000 bpd, according to IEA estimates. Saudi Arabia continued to pump at the higher levels it reached in March, at more than 10.1 million bpd.
“Early soundings suggest that Opec will sustain rates at near 31 million bpd during May, extending the lofty production levels of the previous two months,” the IEA said. “Opec’s core Gulf producers – led by Saudi Arabia – are sticking with their defence of market share ahead of a scheduled June 5 Opec meeting.”
The IEA reports that the UAE is producing at a steady rate of 2.8 million bpd, although that seems to be an underestimate. The UAE reported to Opec that it produced more than 2.9 million bpd last month than it did during all of the first quarter of the year, according to the Opec secretariat’s monthly report, released on Tuesday.
The IEA acknowledged that UAE and other Gulf producers appear to be ramping up their capacity even with lower oil prices.
“According to reports by Baker Hughes and others, Saudi Aramco, Abu Dhabi National Oil Company (Adnoc) and Kuwait Petroleum are all using a record number of drilling rigs, increasing supply and boosting investment in oil exploration and production, even as international oil companies slash their budgets and put projects on hold,” the IEA said. “Saudi Arabia, the UAE and Kuwait combined are producing at the highest rate in at least three decades.”
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