Five reasons for recent OPEC oil output decline
BAKU, Azerbaijan, Oct. 30
By Leman Zeynalova – Trend:
There are several reasons for the recent decline in OPEC production, according to the report released by the World Bank (WB).
The first reason is that in July 2019, the organization, together with their non-OPEC partners under the Vienna agreement, agreed to an extension of existing production cuts (of 1.2 mb/d) through March 2020, Trend reports.
“Production cuts among the participating OPEC members since the start of 2019 have actually been around 50 percent larger than agreed, mainly as a result of deeper contractions in Saudi Arabia,” said the WB.
Secondly, production in Saudi Arabia in the third quarter of 2019 fell as a result of attacks on its oil infrastructure, with output in September dropping to its lowest level since 2011.
Moreover, crude oil production continued to fall in Venezuela and Iran. Their combined output was down by two-fifths (2 mb/d) in 2019Q3 compared to 2018 levels.
The third reason is that production in Venezuela declined to 0.7 mb/d in September, 50 percent lower than a year ago, as a result of the ongoing economic and humanitarian crisis.
The fifth factor leading to the decline is that in Iran, U.S. sanctions have led to oil exports dropping to just 0.2 mb/d in 2019Q3, with production almost entirely absorbed by domestic consumption.
In September, the United States imposed new sanctions on several Chinese shipping companies for allegedly breaching U.S. sanctions on Iran by continuing to transport Iranian oil, which became the fifth reason.
“The sanctions led to a sharp spike in shipping costs, as they included some of the largest oil transporters. While shipping costs have dropped back from their recent peaks, the increase may make long distance oil exports more expensive."
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