(Dow Jones) OPEC Tuesday disclosed that its members continue to pump oil at levels not seen since 2008 as the most recent production figures show the group’s output rising to its highest level this year, leaving the market amply supplied.
In its latest monthly market report, the Organization of Petroleum Exporting Countries said its crude production was 32.964 million barrels a day in April, up 631,000 barrels a day from the previous month.
The number, based on disclosures by OPEC members, is above market requirements, which the group pegs at just over 30 million barrels a day. The high production level indicates the group continues to act to dampen prices which have remained well above its ideal level of $100 a barrel for much of the year amid mounting tensions between the West and Iran, which have dented the Islamic Republic’s oil exports.
More recently, concerns over the global economy have overshadowed the risks presented by the loss of Iranian oil and sent prices plummeting, helped in part by ample production by OPEC members intended to offset declining Iranian exports.
However, if prices continue to decline the group may face strong internal pressure from some members to reduce production levels, a subject that will be much in focus at this week’s meeting of the group in Vienna.
“If production remains at its current level, the global oil market risks seeing a supply surplus of well in excess of 1 million barrels per day in the second half of the year, which would exert further pressure on the oil prices,” said Commerzbank in a note.
Saudi Arabia’s oil minister, Ali Naimi, has already caused a stir when he implied Monday that he would favor OPEC adopting a higher production ceiling than the 30 million barrels a day, though he later backtracked, saying Tuesday he was happy with things as they stood.
Indeed, the group may already be easing its output following the recent slump in oil prices, which saw the price of crude futures fall to an 8-month low at the beginning of June as concerns over the state of the global economy weighed on market sentiment.
Disclosures by OPEC members showed OPEC’s largest producer, Saudi Arabia, reduced its output to 9.8 million barrels a day in May from 10.1 million barrels a day in April. The data showed most other producers also decreased their output slightly in May.
Despite the economic headwinds, the group maintained its view on global oil demand growth at 0.9 million barrels a day, but acknowledged that a further decline in demand was a possibility in the second half of the year.
“It is worth highlighting that the associated risks and uncertainties in the forecast are on the high side, given the current global market situation, as well as the other factors influencing supply,” OPEC said.
“The upcoming driving season might be affected by movements in retail gasoline prices and economic developments worldwide; hence, world oil demand would show a further decline and might see a cut of between 0.2 and 0.3 million barrels a day from the current forecast of the year’s total growth,” it added.
– By Sarah Kent, Dow Jones Newswires