OPEC's oil output jumps again in June as the group struggles to end the crude glut

Key Points
  • OPEC's oil output rose again in June, jumping by nearly 400,000 barrels a day.
  • Libya and Nigeria, two OPEC members exempt from cutting output, accounted for the biggest increases.
  • Saudi Arabia reported it pumped above a quota it agreed to last year.
Oil prices on the move as OPEC production rises in June

OPEC's oil production rose again in June, driven by increases in Libya and Nigeria and as top exporter Saudi Arabia reported it pumped more than it agreed to last year.

The producer group's total output jumped by about 393,500 barrels a day to a total of 32.6 million barrels a day last month, according to independent assessments cited by OPEC in a monthly report. The increases came despite the producer group extending a deal to limit production in May.

OPEC and other exporters including Russia have agreed to cut their output by 1.8 million barrels a day from October levels through the first quarter of 2018. The cuts are aimed at shrinking global stockpiles and boosting oil prices.

While the bump in OPEC's June output is just a fraction of global production, the group has struggled to drive stocks in the developed world down to the five-year average. The effort has pushed up oil prices, leading to a quicker-than-expected rise in production in the United States and elsewhere.

Libya and Nigeria, two OPEC members exempt from cutting output, once again led the increases. OPEC granted them exemptions because their supply had been reduced by internal conflicts, but the group is reportedly considering output caps now that they've restored much of their production.

Still, OPEC's two largest producers, Saudi Arabia and Iraq, as well as Angola also increased output.

Notably, Saudi Arabia reported it raised output by 190,000 barrels a day, pushing its total output to 10.07 million barrels a day, slightly above the cap it agreed to in November. The self-reported increase was nearly four times as large as independent assessments of the kingdom's change in production.

Analysts typically rely on the independent figures, but Saudi Arabia's self-reported data are considered among the most reliable. Throughout much of the first six months of the deal, the Saudis kept production well below their quota.

Data on tanker ship loadings had indicated that exports from Saudi Arabia and other OPEC members rose in June. Earlier on Wednesday, a Saudi industry source told Reuters the kingdom will reduce exports to the lowest level this year to meet summer energy demands at home while adhering to its production commitment.

2018 Supply and Demand

In 2018, growth in demand for oil will just slightly exceed a jump in production from producers outside OPEC, the cartel forecast in the report. That will cause demand for OPEC's oil to fall slightly, it said.

OPEC expects world oil demand growth to slow down slightly next year. It forecast global consumption will grow by 1.26 million barrels a day to average 97.6 million barrels a day in 2018.

Meanwhile, the cartel projects non-OPEC production growth will grow by 1.14 million barrels a day, driven by more pumping in the United States, Brazil, Canada and Russia.

Factoring in higher natural gas liquids production from OPEC, the world will need about 32.2 million barrels a day from the group, it reported. That is down 100,000 barrels a day from 2017.

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