OPEC crude oil production fell 110,00 barrels per day (bpd) to 30.34 million bpd during the month of July 2013 according to data from Platt's. Saudi Arabia, the United States and Canada all posted production increases, but reductions in output by Libya, Iran and Iraq and a motley handful of others all contributed to the overall lower OPEC production rate.
"When the consuming world wonders why oil prices remain relatively high, the Libyan production drop-off cited in our report is a reason," said John Kingston, Platt's global director of oil, "as well as the declines seen from South Sudan, Egypt, Syria, and in particular, the decline in Nigeria, though it rose slightly this month."
OPEC swing producer Saudi Arabia has tried to pick up the slack left by struggles in other oil producing nations, but a 200,000 bpd month-over slowdown in Libya overtook Saudi's production increases to net a total decrease in output.
Libyan crude exports have dropped by 70% to 330,00 bpd, down from an expected 1 million bpd in July. Production in that nation has been hampered by protests and labor strikes and 3 main export terminals are closed at present. Output from Iran fell 20,000 bpd; Iraqi production posts its third straight month of production declines and Angola's crude production fell off by 30,000 bpd to 1.75 million bpd according to Platt's data.
OPEC did exceed its overall production ceiling (barely) of 30 million bpd, and the group agreed in June to maintain the current production ceiling.
As OPEC producers fail to make their marks, there is only so much Saudi Arabia can do to make up the difference. Production in the U.S. and Canada is filling in the gaps lining the pockets of oil producers here, but if OPEC begins to look to WTI to fill in the global production gaps, eventually, WTI will meld into Brent benchmark pricing. EIA reported this week it sees a widening of the WTI/Brent spread ahead in 2014, but the estimated figure is disturbingly low at just an average of nine dollars.
That means either WTI will have to be high, or Brent will have to be low. Remember February when the spread reached $23.00 -- either way, I am reminded of my dad's advice on stray cats..."if you feed them, you will never get rid of them."
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