OPEC oil production surge to record highs in September; says IEA

OPEC’s oil production surged to record highs in September, a top energy watchdog said on Tuesday, underscoring the challenges the group faces as it seeks to curtail its output.

Last month, the Organization of the Petroleum Exporting Countries agreed in Algiers to reduce the amount of oil it pumps to tackle a global oil glut–its first output cut in eight years.

But in its closely-watched monthly report, the International Energy Agency said OPEC crude output rose by 160,000 barrels a day to a record 33.64 million barrels a day in September. That would imply the group needs to slash its production by between 640,000 and 1.14 million to reach 32.5 million to 33 million barrels a day, the ceiling range it agreed in Algiers.

“OPEC has effectively abandoned its free market policy set in train nearly two years ago,” said IEA, which advises industrialized nations on their energy policies. “Now the real work starts.”

Iraq, where production was one of the most contentious issues at the Algiers meeting because it disputes independent estimates, pumped a record 4.46 million barrels a day, a boost of about 90,000 barrels a day, the IEA said.

Supply from Libya, Iran and Nigeria also increased respectively by 70,000 barrels a day, 30,000 barrels a day and 20,000 barrels a day, the IEA said.

Further increases from these three nations–which are exempted from the Algiers deal–“would suggest that bigger cuts would have to be made by others, such as Saudi Arabia,” the agency said. Output from the kingdom, OPEC’s largest producer, fell by about 20,000 barrels a day to 10.58 million barrels a day, according to the IEA.

Russian President Vladimir Putin said on Monday that Moscow could join OPEC’s production cuts despite not being a member. But last month, his country boosted production of crude and natural-gas-liquids by about 400,000 barrels a day to a post-Soviet high of 11.1 million barrels a day, the agency said.

The combination of high OPEC and non-OPEC output helped drive global oil supply up by 0.6 million barrels a day in September.

To be sure, fundamentals are improving for producers. Demand is forecast to expand by 1.2 million barrels a day in 2017, the IEA said.

The agency upgraded its global consumption forecast by about 200,000 barrels a day to 97.5 million barrels a day. It also said commercial inventories in industrialized nations fell for the first time since March, by 10 million barrels to 3.092 billion barrels in August.

Still, the agency warned that “the market, if left to its own devices, may remain in oversupply through the first half of next year.” But “If OPEC sticks to its new target, the market’s rebalancing could come faster,” it added.

Source: MarketWatch