Oil prices reversed earlier gains and drifted lower in early morning trade on Tuesday, after OPEC said that its crude oil production in May rose—despite the output cut deal—on the back of a rebound in exempt Libya and Nigeria, and higher output from Iraq.
As of 8:46am ET, front-month WTI Crude oil futures traded down 0.52 percent at US$45.84, after opening at US$46.01. Brent Crude was down 0.37 percent at US$46.01, compared to US$48.32 at opening.
According to secondary sources, OPEC’s crude oil production in May increased by 336,100 bpd compared to April, to average 32.12 million bpd, the cartel’s Monthly Oil Market Report showed on Tuesday. Crude oil production increased the most in Libya, Nigeria, and Iraq, while production in Angola and UAE showed the largest declines, OPEC said.
OPEC’s figures confirm an S&P Global Platts survey from earlier this month, which placed the cartel’s crude production at 32.12 million bpd in May, up by 270,000 bpd over April, with exempt Libya and Nigeria—and under-complying Iraq—mostly contributing to the output increase.
According to OPEC’s figures released today, the cartel’s de facto leader Saudi Arabia continued to pump below 10 million bpd—9.940 million bpd as per secondary sources. Libya and Nigeria each saw their production levels rise by more than 170,000 bpd, while Iraq increased its output by 44,400 bpd in May over April, at 4.424 million bpd. Iraq’s level should be 4.351 million bpd according to the OPEC deal.
Referring to one of its stated goals with the cuts—to bring commercial oil stocks back to the latest five-year average—OPEC said that total OECD commercial oil stocks fell in April to stand at 3.005 billion barrels. Still, at this level, OECD commercial oil stocks were 251 million barrels above the latest five-year average, OPEC said.
The decline in commercial stocks is expected to continue in the second half this year, “supported by production adjustments by OPEC and participating non-OPEC producers,” the cartel said.
“These trends along with the steady decline in oil in floating storage, indicate that the rebalancing of the market is underway, but at a slower pace, given the changes in fundamentals since December, especially the shift in US supply from an expected contraction to positive growth,” OPEC noted.
The organization expects global oil demand to pick up in the second half of this year, with a 2 million bpd increase in total consumption, in the line with the seasonal average, to reach 97.4 million bpd, compared to 95.4 million bpd in the first half of 2017.
On the supply side, OPEC expects non-OPEC crude oil supply in the second half of the year to rise by 500,000 bpd compared to the first half, to average 58.4 million bpd. The U.S. is seen as the main driver behind this higher growth, OPEC said.
By Tsvetana Paraskova for Oilprice.com
