.. crude trades at US$71.70 a barrel
OPEC’s crude oil production dropped by more than 500,000 bpd month on month in March, to the lowest since February 2015, as Saudi Arabia followed through its commitment to cut deeper than pledged and Venezuela’s crisis, sanctions, and blackouts hit its supply harder than in previous months.
As at today Brent crude was trading at US$71.70 a barrel and West Texas Intermediate was changing hands for US$64.68 per barrel.
The only bearish factor for prices in the last few days was a signal from Moscow that Russia may refuse to extend the production cuts it agreed to undertake in partnership with OPEC beyond their initial June end.
The news even managed to reverse the climb in oil benchmarks earlier this week but later Brent and West Texas Intermediate resumed their rise.
Also Crude oil prices brushed off the Energy Information Administration inventory report today, which saw a 7-million-barrel build in crude oil inventories for the week
The authority also reported a reduction in gasoline inventories a day after the American Petroleum Institute estimated those had declined by 7.1 million barrels. The EIA confirmed a draw, at 7.7 million barrels.
Meanwhile, the crisis in Venezuela continues and Asian refiners suspend their imports of Iranian oil ahead of the expiry of sanction waivers. Tailwinds are strong.
A week earlier, crude oil inventories had added 7.2 million barrels while gasoline inventories shed 1.8 million barrels.
In its closely-watched Monthly Oil Market Report, OPEC said on Wednesday that its secondary sources’ estimates point to total OPEC-14 crude oil production averaging 30.02 million bpd in March, down by 534,000 bpd from February, and the lowest since the February 2015 production of below 30 million bpd.
OPEC’s de facto leader and largest producer Saudi Arabia followed through its commitment from February to cut deeper and pump well below 10 million bpd. Saudi Arabia’s crude oil production dropped by a massive 324,000 bpd from February to stand at 9.794 million bpd in March—just as Saudi Energy Minister Khalid al-Falih had said the Kingdom would do and pump around 9.8 million bpd in March, some 500,000 bpd below the 10.311-million-bpd commitment in the OPEC+ deal.
An OPEC member exempt from these production cuts, Venezuela, contributed inadvertently to the cartel’s mission to reduce global oil supply. Venezuela’s crude oil production plunged by 289,000 bpd to below 1 million bpd—to 732,000 bpd in March, according to OPEC’s secondary sources.
Venezuela’s oil industry suffered from U.S. sanctions, continued economic crisis, and massive blackouts last month. Interestingly, Venezuela also self-reported to OPEC a huge drop in its production to below 1 million bpd—not the typical flattish output compared to the previous month as it has been doing lately. Based on direct communication from members, Venezuela’s production plunged by 472,000 bpd from February to 960,000 bpd in March, OPEC’s report showed.
Elsewhere, the cartel’s second-largest producer Iraq also slashed production considerably, by 126,000 bpd to 4.522 million bpd according to OPEC’s secondary sources—nearly falling in line with its OPEC+ quota of 4.512 million bpd.
Production in Iran, under U.S. sanctions and exempted from OPEC’s cuts, dropped by 28,000 bpd to 2.698 million bpd, while the third member exempted from the deal, Libya, saw its production rise by 196,000 bpd to 1.098 million bpd in March after its biggest oil field, Sharara, returned to operations last month.
Projecting global oil demand in this month’s report, OPEC revised down its oil demand growth estimate to around 1.21 million bpd from 1.24 million bpd in last month’s report, saying that “this is due to slower-than-expected economic activity compared with the expectations of a month earlier.”
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