OPEC members’ December output shows stronger compliance to the production cut deal but the organisation raised its supply forecast from non-members as higher oil price attract U.S. shale drillers.
OPEC members’ December output shows stronger compliance to the production cut deal but the organisation raised its supply forecast from non-members as higher oil price attract U.S. shale drillers.
Production by The Organization of the Petroleum Exporting Countries members rose by 42,000 bpd to 32.42 million bpd, led by a gain in Nigeria which along with Libya was exempted from the supply cut because unrest had curbed their production.
OPEC and Russia-led non-OPEC members agreed to extend a production cut until the end of 2018 to bring global inventories to their five-year average by reducing output by about 1.2 million bpd.
OPEC said the average conformity level for the first year of the pact was at 107 per cent, while compliance in December hit 129 per cent.
Venezuela, whose output is dropping amid an economic crisis, told OPEC its production sank by about 216,000 bpd to 1.621 million bpd in December, believed to be the lowest in decades.
The International Energy Agency (IEA) said a plunge in Venezuelan supply cut OPEC crude output to 32.23 million bpd in December, boosting compliance to 129 per cent. Declines are accelerating in Venezuela, which posted the world's biggest unplanned output fall in 2017.
The UAE, which lagged many of its peers on compliance last year, said it cut output by 38,000 bpd to below its OPEC target for the first time. The compliance improvement comes as the country prepared to assume the rotating OPEC presidency in 2018.
With outside producers expected to pump more, OPEC in the report cut its estimate of global demand for its crude in 2018 by about 100,000 bpd to 33.1 million bpd.
OPEC forecast non-members to boost supply by 1.15 million barrels per day (bpd) this year, up from 990,000 bpd expected previously.
“Higher oil prices are bringing more supply to the market, particularly in North America and specifically tight oil (shale),” OPEC said in the report. “Shale producers in the US have managed to lower their breakeven costs by 30-50 per cent in 2015-17, by improving technology and efficiency.”
Shale sector costs have risen with renewed drilling activity, but producers are still able to achieve decent rates of return at $53 per barrel and could achieve similar returns at $60 per barrel, even if costs were to rise by a further 15pc, according to JP Morgan.
Shale output has been gradually rising since its bottom in September 2016, to reach 5 million bpd in November 2017, OPEC said.
Source: Pipeline ME
