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Page added on April 9, 2014
OPEC Plans to Make Room for Extra Oil From Iran, Iraq, Libya
OPEC, which supplies 40 percent of the world’s oil, will accommodate additional output from members Iraq, Iran and Libya, Secretary-General Abdalla El-Badri said, without explaining how it will do so under the group’s ceiling.
The Organization of Petroleum Exporting Countries will wait until 2015 to discuss output targets with Iraq, which currently operates outside the production-quota system for each of the group’s other 11 member countries, El-Badri told reporters today in Doha, Qatar. OPEC foresees gradual increases from Iraq and Iran, while Libya is capable of boosting output by as much as 1 million barrels within a month, he said.
“There is no problem for OPEC to absorb any production increment from Iraq and Iran in 2014,” El-Badri said. “When Libya output comes back, we will accommodate it because its production is in our numbers.”
OPEC is set to boost output as its second-biggest producer Iraq pumps at a 35-year high and Libya’s government makes progress in talks with rebels who control fields and export terminals in the country’s oil-rich east. Sanctions on Iran over its nuclear program have constrained the country’s production and sales of crude. OPEC plans to meet on June 11 in Vienna to review its output target, now at 30 million barrels a day.
World Demand
Global demand will increase by 1.1 million barrels a day in 2014, and the group will produce up to 30 million barrels a day for the rest of the year, El-Badri said. “Of course, ministers can change that when they meet,” he said.
OPEC pumped 30.3 million barrels a day in March, data compiled by Bloomberg show.
The group has yet to determine how to make room for potential output increases from Iraq, Iran and Libya, El-Badri said. “We will discuss that when they come to the point to discuss their increase,” he said.
Iraq, with the world’s fifth-largest oil reserves, is rebuilding its energy industry after decades of war and economic sanctions. Helped by investors including Royal Dutch Shell Plc (RDSA) and Exxon Mobil Corp. (XOM), it leap-frogged Iran in 2012 to rank second in OPEC, after Saudi Arabia. Iraq pumped 3.4 million a day in March, according to data compiled by Bloomberg, and targets 9 million a day.
Iran raised production to 2.9 million barrels a day last month, an increase of 65,000 barrels from February, the data show. Libya, which produced 250,000 barrels a day in March, holds Africa’s biggest crude reserves. Libya’s government reached an agreement with eastern rebels on April 6 to reopen two oil ports.
OPEC’s spare production capacity is at an adequate level this year, and producers and consumers are happy with current oil prices, El-Badri said. The price for OPEC’s basket of crudes rose $1, or 1 percent, yesterday to $103.16 a barrel, the group’s secretariat reported today.
The group’s 12 members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela.
6 Comments on "OPEC Plans to Make Room for Extra Oil From Iran, Iraq, Libya"
rockman on Wed, 9th Apr 2014 5:25 pm
2006 32 mmbpd $68 $795 billion/yr
2013 36 mmbpd $100 $1.3 trillion/yr
So let’s assume Iraq et all add 4 million bopd. So the rest of OPEC cuts back from 36 million bopd to 32 million bopd…where they were in 2006. In 2006 the rest of OPEC was very happy making $795 billion/yr considering that just 3 years earlier they were pulling in only $330 billion/yr.
So OPEC (less Iraq et al) cuts back to 32 million bopd and pulls in $1.17 trillion/yr instead of the $1.32 trillion they are making today. Which is still 65% more than they were making in 2006. And in 2006 they were making 240% more than they were just 3 years earlier in 2003.
And let’s not forget there’s an addition advantage to cutting back production especially for the Saudis.. The KSA has tens of $billions earmarked for projects designed to offset their declining reserves. By cutting back on production they are essentially adding future production capability and not spending one penny to do so.
I’m pretty sure the royal rulers in the KSA are vaguely familiar with the concept of PO and just might see the value of hanging on to more oil for future sales. And lastly let’s not forget ELM: the KSA has just started up a refinery with the Chinese in the KSA that is effectively pulling 600,000 bopd out of the market place. Someone’s refineries which getting that oil last year…this year they aren’t. So they either accept a 220 million bbl supply deficit per year or they are out there looking to buy it from someone else. Like maybe Iraq? And also let’s not forget that the global demand for $100/bbl oil has not remained static: China is still growing their demand at a significant annual rate. Will that continue? I don’t know. But today it is.
There’s certainly no way to be sure the OPEC members will follow the logical path I’ve laid out. But IMHO such a path seems rather obvious.
We are currently producing more oil then every before in history. And oil is selling for the highest yearly average price we’ve ever seen. There is no glut today. IMHO I don’t see a glut in the market place in the future. The only real potential I see for a significant drop in oil prices is if the world slides into another severe recession.
Northwest Resident on Wed, 9th Apr 2014 6:12 pm
rockman — The advantage to KSA is not only that they will be able to save more oil to sell later, but with their rapidly growing population and the amount of oil it takes to sustain that population, this increased contribution to global oil supply by other countries will allow KSA to allocate more of their production to “keeping the peace” within their own borders. At least until they run out or begin to hit significant declines. In the end, it seems to me that the increased oil contributions from Iran, Iraq and Libya only postpone the inevitable a little while longer.
rockman on Wed, 9th Apr 2014 6:23 pm
NR – Exactly. I still suspect that the Saudis are more concerned about not enough oil reaching the market place causing another price spike which induces a global recession and thus driving down demand and prices. I have to think they would be very happy to hold enough excess capacity that they can use to keep prices stable where they are today.
Nony on Thu, 10th Apr 2014 3:11 am
Just goes to my point of how the high price is not reflecting peak oil depletion but an effective cartel.
marmico on Thu, 10th Apr 2014 5:08 pm
World GDP
2006, GDP PPP = $65 trillion
2012, GDP PPP = $86 trillion
OPEC oil revenues
2006 = $0.8 trillion
2012 = $1.2 trillion
OPEC oil revenue as a share of World GDP
2006 = 1.23%
2012 = 1.41%
OPEC picked up l/8th of a penny per dollar of GDP. LOL
DC on Thu, 10th Apr 2014 6:41 pm
Just where did all that new ‘wealth’ since 2006 come from exactly? How did the world add 21T in a mere 6 years, which is an annual ‘growth’ of over 5% a year-and is greater than even the current debt of the u$? Am I missing something here? 21T of real tangible ‘wealth’ or 21T the result of asset and commodity inflation-endless QE? World has been treading water\recession since 2008-yet ‘we’ still added 21T to GDP(PPP)? How? and who did it all go? If its merely inflated valuation-then we would expect ‘OPEC’s revenue to remain more or less constant in real terms in a stagnate global economy.
The other ‘problem’ is asserting high oil prices stop at what OPEC makes. High oil prices have a knock on effect-everything upstream made from oil(which is nearly 100% of that 86T) goes up along with it. It doesn’t end up in OPECs pockets-but those higher prices are spread throughout the entire supply-consumption chain. I pay more for food because of high oil prices. But that goes to the Agri-corps and trucking firms(among many others)-not OPEC.