Sign Up for FREE Daily Energy News
  • Stay Connected
  • linkedin
  • twitter
  • facebook
  • youtube2

Vista Projects
Copper Tip Energy Services
Vista Projects
Copper Tip Energy

OPEC, Russia Supply Steady as Saudi Masks Venezuelan Drop

These translations are done via Google Translate

February 2, 2018, by Grant Smith, Dina Khrennikova and Elena Mazneva


Crude production by OPEC and its main ally Russia held steady last month as increases in Saudi Arabia and Iran offset the ongoing deterioration of Venezuela’s oil industry.

Output from the 14 members of the Organization of Petroleum Exporting Countries rose just 20,000 barrels a day to 32.4 million a day in January, according to a Bloomberg News survey of analysts, oil companies and ship-tracking data. Russia’s production was little changed compared to December and totaled 10.95 million barrels a day, according to data emailed Friday by the Energy Ministry’s CDU-TEK statistical unit.

The cartel continues to restrict output even more than it pledged in an accord with Russia and other producers aimed at clearing a global glut. Russia kept its pledge even after its biggest producers said late last year that they were not changing their investment plans for this year.

Goldman Sachs Group Inc. said Thursday the deal between OPEC and its allies has already accomplished their goal of returning swollen inventories to normal levels. Overall compliance among OPEC’s 12 members bound by the accord was 127 percent in January, the survey showed. Russia’s compliance was close to 100 percent.

Venezuelan Descent

Part of the reason for OPEC’s over-compliance lies with Venezuela, where a chronic recession and under investment have taken their toll on the oil industry. The country’s output dropped by 30,000 barrels a day to 1.67 million a day last month, the lowest since 1989, according to data compiled by Bloomberg.

The survey also indicated that Venezuela’s December production was lower than previously thought, showing a 110,000-barrel-a-day reduction from the previous estimate. In the months ahead, the nation’s decline could accelerate as a result of crippling debt, failing infrastructure and U.S. sanctions, the International Energy Agency has warned.

ROO.AI Oil and Gas Field Service Software

Staying the Course

Despite tumbling output in the Latin American country, Saudi Energy Minister Khalid Al-Falih insisted last month that OPEC will keep production constrained at least until the end of the year to ensure the stockpile surplus is fully eliminated.

Saudi Arabia’s output rose by 60,000 barrels a day in January to 10.01 million a day, the survey showed. That’s still below the maximum it’s permitted under the accord.

The next biggest increase was in Iran, where production expanded by 30,000 barrels a day to 3.83 million a day, slightly higher than its limit. The country is ramping up output at oil fields lying to the west of the Karoun River.

Production declined in the United Arab Emirates, by 40,000 barrels a day to 2.85 million a day, also still slightly above its agreed ceiling. Saudi Arabia’s Al-Falih has vowed to put pressure on fellow members who aren’t making all of the supply curbs they promised.

‘Domino Effect’

Russia’s biggest crude producers, the state-run Rosneft PJSC and Lukoil PJSC controlled by its billionaire executives, have said they are not changing their investment or upstream plans for 2018 even as the caps were extended through the year-end. Both commissioned high-capacity greenfield wells last month.

Russia will most likely maintain its compliance level close to 100 percent this year, “otherwise we may see a domino effect as other countries may also break the deal,” said Dmitry Marinchenko, oil and gas director at Fitch Ratings Ltd. in London.

Yet, Russian oil producers “will be gradually getting tired of the obligation to keep a lid on their output,” he said. If crude prices stay well above $60 a barrel and global inventories continue shrinking, the companies may get an informal signal that the deal is nearing its end, and increase drilling activities, which may happen as soon as in April or May, he said.

Share This:

More News Articles