BAKU, Azerbaijan, May 13
By Leman Zeynalova – Trend:
OPEC production is expected to begin increasing in July 2020 in response to rising global oil demand and prices, Trend reports citing the US Energy Information Administration’s (EIA) May Short-Term Energy Outlook (STEO).
From that point EIA expects a gradual increase in OPEC crude oil production through the remainder of the forecast, with production rising to an average of 28.5 million b/d during the second half of 2021.
Part of this increase is the result of oil production resuming in Libya. After reaching production levels of 1.2 million b/d in late 2019, Libya’s crude oil output averaged 80,000 b/d in April 2020.
Most of the country’s export ports closed and several oil fields were shut-in, including El Sharara and El Feel, in January 2020. With the ongoing civil war in Libya, EIA does not expect production to increase until late 2020. Once currently shuttered export terminals and oil fields reopen, EIA expects that Libya will boost production to near-capacity despite low oil prices in a relatively short time.
EIA assumes OPEC countries will mostly adhere to announced cuts during the first two months of the agreement (May and June). This forecast assumes OPEC’s production compliance relaxes later in the forecast period, as stated production cuts are reduced and global oil demand begins growing again.
EIA forecasts OPEC crude oil production will fall below 24.1 million b/d in June, a 6.3 million b/d decline from April when OPEC production increased following an inconclusive meeting in March.
The forecast for June OPEC production does not account for additional voluntary cuts announced by the Saudi Energy Ministry on May 11.
Saudi Arabia said it will cut oil output by another 1 million barrels a day on top of what it already agreed with OPEC allies. Kuwait and the United Arab Emirates followed up with extra cuts of their own.
If OPEC production declines to less than 24.1 million b/d, it would be the group’s lowest level of production since March 1995.
EIA expects that OPEC surplus crude oil production capacity, which averaged 2.5 million b/d in 2019, will average 5.8 million b/d during the third quarter of 2020. EIA expects it to decline to an average of 3.7 million b/d in 2021 with increased production as the targeted cuts are relaxed. These capacity increases include the Neutral Zone production ramp up that started in March 2020 that will add 0.6 million b/d of additional surplus capacity when completed in a year.
Follow the author on Twitter:@Lyaman_Zeyn