OPEC’s Fight For The Oil Market Has Just Begun
The International Energy Agency said that the Organization of Petroleum Exporting Countries is not slowing down oil production despite prices being low over the last few months. OPEC agreed last November to keep increasing its production to maintain the volume of sales appealing to non-member countries to work on solving the glut they’ve caused.
While others were tightening their production belt, Gulf based organizations have been working on expanding their supplies for the future. It’s premature to say that OPEC has already won the oil market battle, rather it is possible that the battle has just begun, but they sure have a big advantage in comparison to their competition.
US crude investors suggest that the supremacy of OPEC is loose and their market rule won’t be long. To stop the further rise of power, the IEA has already increased their overall estimate for non-OPEC suppliers in 2015.
The price of oil has already recovered by 50% in London and it’s getting higher in the US as well. OPEC members who are scheduled to meet next month are more united in their plan to maintain their high levels of production according to Kuwaiti Oil Minister, Ali Al-Omair.
The first quarter’s output was quite strong for Russia, China, Malaysia, Vietnam and Colombia so the IEA rose its estimate for non-OPEC supply up to 200,000 barrels a day. Non-OPEC suppliers hold around 60 percent of the global oil supply and this year’s output will expand to 57.8 million barrels a day, an increase of 830,000 barrels a day.
Supply from OPEC’s members in April went up to the highest since September 2012, most likely due to the high output from Iran and Iraq. Kuwait, Saudi Arabia and the United Arab Emirates remained at the peak of their production with supply at its highest in three decades.
Both Iraq and Iran expanded their production by around 100,000 barrels a day reaching their own record peaks. This is the first time since international sanctions were placed on Irans in 2012 that their production is reaching its highest point with a total of 2.88 million barrels a day. Iraq’s boost in output set a record of their highest rate of production in thirty years with a total of 3.8 million barrels a day.
The most influential OPEC member, Saudi Arabia, maintains their policy of keeping their share of the market with their 10 million barrels a day production.
On June 5th the group will gather in Vienna to review its plans for the second part of the year and daily oil production overall. Right now production is at 30 million barrels a day which according to IEA is 1.2 million higher than it needs to be.