Opec raises crude oil production

Brent price continues firmness on hopes of a decision on freezing output at a meeting on April 17

Crude oil production from the Organization of the Petroleum Exporting Countries (Opec) rose 40,000 barrels per day (bpd) to 32.38 million bpd in March, driven by sanctions-free Iran, according to data compiled by global research firm Platts.

Despite higher output, the benchmark Brent crude oil price firmed up by seven per cent in March to close at $38.7 a barrel towards the month-end. Interestingly, Brent crude oil price continued its upward march to trade currently at $41.6 a barrel, thus recording 14 per cent increase from March 1.

“Iran and Iraq remain the big swing factors, having driven Opec output higher in March, while Saudi Arabia has been more neutral, keeping production steady since January,” said Eklavya Gupte, senior editor at Platts. “Neither Iran nor Iraq has made firm commitments to the Doha talks on April 17, but their collective stance could be a decisive element regarding any agreement over a production freeze.”

The drop in March oil production volumes from United Arab Emirates (UAE), Libya, Nigeria and Venezuela was offset by a rise in output from Iran, which accounted for the single largest increase within Opec, followed by smaller increases observed in Iraq and Angola.

Iran’s output in March climbed 110,000 bpd from the previous month to 3.23 million bpd. Its production is up 340,000 bpd since December, as it seeks to regain its former share of the global oil market. The rise is less dramatic than the country’s leaders had predicted, but it is still a notable increase as former buyers return to the market.

The demand for Iranian crude has jumped, particularly from Indian and South Korean refiners. France’s Total, Spain’s Cepsa and Russia’s Lukoil have noticeably returned as customers, having emerged since the West lifted sanctions against Iran on January 16.

More Iranian crude is expected to flow this month to Europe, buoyed by an increase in the level of reinsurance coverage for shipments of Iranian crude oil. European banks are gradually showing more confidence in financing Iranian crude transactions.

In Iraq, oil output rose 30,000 bpd to 4.16 million bpd in March, largely on the back of a substantial rise in exports from the country’s southern terminals. However, the increase in southern-terminal oil exports was blunted somewhat by a decline in total volumes from the semi-autonomous Kurdistan region, where vandalism and attacks continued to disrupt exports via the pipeline, which transports crude from northern Iraq and Iraqi-Kurdistan to the Turkish Mediterranean port of Ceyhan.

Similarly, Angolan output in March was also up by 30,000 bpd to 1.80 million bpd, the highest production seen since December.

OPEC's largest producer, Saudi Arabia, maintained output at 10.2 million bpd for the third consecutive month, the survey showed. All eyes will now be on April 17, when major oil producers from both OPEC and non-OPEC countries will meet in Doha to discuss freezing oil production at January levels.

At present, 13 countries have confirmed their participation: Algeria, Azerbaijan, Bahrain, Ecuador, Indonesia, Kuwait, Nigeria, Oman, Qatar, Russia, Saudi Arabia, Venezuela and the UAE.

Iraq and Iran have not shown any firm commitment to the output freeze proposal, while Libya, whose production remains crippled by political unrest, has said it will not join the meeting.

The plan to freeze production at January levels was initially voiced by top world producers Saudi Arabia and Russia, as well as OPEC members Venezuela and Qatar, in mid-February, to help balance oil markets and support oil prices.