Saudi Arabia tells OPEC oil output surge maintained in April

jueves 14 de mayo de 2015

Saudi Arabia boosted crude oil production for a second month to the highest level in at least three decades, helping to raise OPEC output as U.S. supply growth showed signs of slowing.

The Middle Eastern country increased crude output by 13,700 bpd in April, to an average 10.308 MMbpd, according to data the country communicated to the Organization of Petroleum Exporting Countries’ (OPEC) secretariat in Vienna.

Prices collapsed by almost half last year, as Saudi Arabia led OPEC in maintaining production, rather than cede market share to booming U.S. supply. The group has become more unified about keeping its output target, because prices are now rising, according to Kuwait’s oil minister. Crude in New York has surged more than 40% from its March low, as U.S. drillers pulled a record number of rigs from fields.

“The Saudis must be content that their policy of protecting their market share has worked so well, and prices did not stay below $50 for long,” said Christopher Bellew, senior broker at Jefferies International Ltd. in London. “They held their nerve and now see a stable market with their share preserved.”

West Texas Intermediate crude gained $1.50, or 2.5%, to end at $60.75/bbl on the New York Mercantile Exchange. It hit a 6-year low of $42.03/bbl on March 18.

Price recovery

Oil prices have recovered, “driven partly by the belief that the supply glut may be easing, with higher demand projected ahead of the peak U.S. driving season,” OPEC said in its monthly oil market report. The group increased its forecast for global oil demand this year by 10,000 bpd, to 92.5 MMbpd.

OPEC’s 12 members will meet in Vienna on June 5 to discuss production levels and market strategy. The group was divided over whether to maintain its output target at its last meeting in November, Kuwaiti Oil Minister Ali Al-Omair said at a onference in Doha, Qatar, Tuesday. Rising prices mean members are now more unified in their support for keeping the target, he said.

The oil market is in “excellent” condition, Prince Abdulaziz bin Salman, Saudi Arabia’s deputy oil minister, told reporters on April 27.

U.S. shale oil output fell by about 1% this month, and the decline will gather momentum in June, the Energy Information Administration said on Monday. Oil drillers cut the number of active rigs to 668 last week, the fewest since September 2010, according to Baker Hughes Inc., an oil-services company. The count has decreased 58% since December.

Successful strategy

“The Saudi strategy is succeeding so far, given the numerous announcements of capex reductions by oil companies,” Harry Tchilinguirian, the head of commodity markets strategy at BNP Paribas SA in London, said by e-mail. “Saudi Arabia is sowing the seeds of the next sustainable price rally, which might not be for another two to three years.”

A technical meeting between OPEC and non-member countries in Vienna Tuesday ended without a pledge to cut output, according to three people who attended and asked not to be identified, because the event was private. OPEC officials met with representatives from Russia, Brazil, Mexico and Azerbaijan to discuss the oil market, the people said.

OPEC’s data compiled from external sources showed Saudi Arabian output of 10.095 MMbpd in April, lower than the figure directly communicated from the nation. The kingdom’s output was 10.069 MMbpd in March, according to these figures, which OPEC describes as being compiled from “secondary sources.”

Supply growth

The 12-member group’s production increased by 18,000 bopd to 30.843 MMbopd, the secondary sources' data show. Production gains in Iran, Iraq, Nigeria and the United Arab Emirates were offset by a decline of 114,300 bopd in Angola.

OPEC maintained projections for supply growth from oil producers outside the group in 2015 at 680,000 bpd. It also kept its 2015 estimate for demand for the group’s crude at 29.3 MMbpd. That’s about 1.5 million bpd less than the group produced in April.

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