After four months of steady increases, OPEC announced its oil output dropped by 79,100 barrels a day last month. A monthly tally released Tuesday revealed the primary explanation for the decrease being several top exporters, such as Saudi Arabia, purposefully scaling back production in an attempt drain oversupply and drive down global stockpiles of crude.
OPEC, in partnership with their biggest exporters, kept nearly 1.8 million barrels a day of oil production from entering the market in August. Libya and Nigeria were exempt from the plan, laid out late last year, as domestic conflicts had already hindered production. However, both countries restored output much faster than anticipated causing an unforeseen increase in production over the last few months.
However, Libya joined the other 12 OPEC members last month and dropped production by roughly 112,000 barrels a day. Saudi Arabia, still the largest exporter of the group, dropped production modestly to barely 10 million barrels a day, down from almost 11 million barrels a day in June. Iraq and the United Arab Emirates also cut production, though not to the level they had agreed to in November.
As a result, OPEC has forecasted higher demand for the remainder of 2017 and 2018. They now predict the world will expend 96.77 million barrels a day this year and 98.12 million barrels a day next year.
Additionally, though damage from Hurricane Irma is still being assessed, OPEC stated they do not expect damage caused by either Irma or Hurricane Harvey to have any long-term impact on U.S. economic growth or production. The U.S. Department of Energy’s Energy Information Administration echoed that finding last Wednesday when they reported that they expect U.S. crude production to rise in 2018.
International benchmark Bent crude rose 46 cents to $54.30 per barrel and U.S. West Texas Intermediate crude rose 16 cents to $48.23 a barrel on Tuesday, signaling that their plan to scale back production has had the intended effect.
Article written by HEI contributor Kevin Abbott.