OPEC oil output drops as sanctions cut Iranian supply
OPEC oil output fell further from its four-year high in July as US and European sanctions cut supply from Iran to the lowest in more than two decades, a Reuters survey showed yesterday.
Supply from the 12-member Organization of the Petroleum Exporting Countries has averaged 31.18 million barrels per day (bpd) in July, down from 31.63 million bpd in June, the survey of sources at oil companies, OPEC officials and analysts found.
Oil prices declined below $100 a barrel in June, a level favoured by Saudi Arabia and other OPEC members, prompting speculation they might trim supply to prop up prices. There is little evidence to suggest this has happened in July, although the drop in output is larger than some expected to see.
"The decline by 450,000 barrels per day to 31.2 million bpd is more than expected and almost evaporates the supply surplus," said Carsten Fritsch, analyst at Commerzbank in Frankfurt.
OPEC's production has declined for three months since it pumped 31.75 million bpd in April, the highest since September 2008. The group is still pumping almost 1.2 million bpd more than its target of 30 million bpd.
The biggest drop this month came from Iran, whose crude is subject to a EU embargo that started on July 1. The embargo also bars EU insurance firms from covering Iran's exports, hindering imports by some non-EU buyers.
"In July, a lot of buyers didn't take crude as they were trying to get the insurance sorted out," said an industry source. "We will never know by how much as the Iranians won't tell us."
According to the survey, Iran's supply slipped by 150,000 bpd to 2.80 million bpd in July. That would be its lowest output since 1988, when it pumped 2.24 million bpd, according to figures from the US Energy Information Administration.
The US and European sanctions have pushed Iran from its traditional position as OPEC's second-largest producer to rank third behind Iraq.
Output in Iraq this month has fallen by 30,000 bpd, partly a result of Iraq's Kurdistan region announcing in April it was halting its exports because firms operating there were not getting paid by the government.
Rising Iraqi supplies had helped to keep a lid on oil prices as Western sanctions targeted Iran's exports. (Reuters)