EIA slightly lowers OPEC oil output forecasts
Baku, Azerbaijan, July 11
By Leman Zeynalova – Trend:
OPEC crude oil production is expected to average 31.9 million barrels per day in 2018, a decrease of 0.6 million barrels per day compared with the 2017 level, the US Energy Information Administration (EIA) said in its July Short-term Energy Outlook (STEO).
This is while in its June STEO, EIA expected OPEC crude production 32 million barrels per day in 2018, a decrease of 0.4 million barrels per day from the 2017 level.
The forecast decline is mainly the result of rapidly decreasing crude oil production in Venezuela, which has fallen to less than 1.4 million barrels per day as of June 2018, a 0.6 million barrels per day decrease compared with June 2017, according to the report.
EIA said that OPEC output during the first half of 2018 was also lower as a result of the production caps placed on the group’s members as agreed upon in the November 2016 OPEC production agreement that aimed to limit OPEC crude oil output to 32.5 million barrels per day.
“OPEC crude oil production averaged 31.9 million barrels per day in June. Although the OPEC and non-OPEC participants agreed on November 30, 2017, to extend the production cuts through the end of 2018 in order to reduce global oil inventories, tightening market conditions led the group to relax the production cuts starting in July 2018.”
EIA expects that OPEC crude oil output will decrease by less than 0.1 million barrels per day on average in 2019.
The small decline in forecast OPEC production in 2019 reflects crude oil production increases from some producers that mostly make up for expected declines of more than 1.0 million barrels per day in Iran and Venezuela combined, said the EIA.
The July STEO reflects the US withdrawal from the Joint Comprehensive Plan of Action (JCPOA) and the plan to reinstitute sanctions on companies doing business with Iran.
“Even though no US companies are directly involved with Iranian companies, many European and Asian banks, insurers, and oil companies announced they might reduce commercial activity with Iran in light of potential US sanctions.”
EIA believes that sanctions will likely have a direct effect on the Iranian oil sector, which would limit crude oil exports and production from the country by the end of 2018.
EIA also expects Venezuela’s production to continue to fall through the forecast period as the financial situation of the state-owned Petróleos de Venezuela (PdVSA) and the Venezuelan government becomes more precarious.
Follow the author on Twitter: @Lyaman_Zeyn