S. Arabia is set to support an extension of the production cuts when OPEC next meets on May 25
OPEC said Wednesday its output had kept falling in March as members tightened compliance to agreed cuts, but said U.S. producers were enjoying a revival thanks to higher oil prices.
The 13-member Organization of the Petroleum Exporting Countries committed last year to cut about 1.2 million barrels of oil a day in a bid to bring a vast global oversupply of crude back in line with demand and raise petroleum prices.
The agreement helped raise oil prices about 20% after it was announced on Nov. 30. Russia and 10 other non-OPEC producers also pledged to trim another 558,000 barrels a day.
In its closely watched monthly oil report, OPEC said its production decreased by 153,000 barrels a day to an average of 31.93 million barrels a day. The group uses independent experts—such as analysts and shipping trackers—to assess its output.
The decrease was largely driven by lower production in the United Arab Emirates and Venezuela, respectively by 33,000 barrels a day and 26,000 barrels a day—which have both committed to reduce their output.
Three OPEC nations exempted from the cuts also suffered production losses. Libyan production fell in March by 61,000 barrels a day after its largest oil field, Sharara, was blocked by guards over wage arrears. Nigeria, which fields are producing less due to maintenance and sabotage, saw its output falling by 30,000 barrels a day while Iran, which is struggling to sell its oil due to U.S. banking sanctions, lost 29,000 barrels a day.
But Saudi Arabia, which has carried the brunt of the effort so far, increased its production by 42,000 barrels a day according to independent experts used by OPEC. However, its output remains below its quota of about 10 million barrels a day.
Saudi Arabia is set to support an extension of the production cuts when OPEC next meets on May 25, people familiar with the matter said this week.
But the group is still pondering how to deal with rising U.S. production, which is filling the vacuum left by its output curbs.
In its monthly report, OPEC raised its U.S. supply growth forecast by 200,000 barrels a day for 2017.
“The number of drilling rigs and the reactivation of companies’ spending are the two most important factors leading to an expected output surge in the coming months.,” it said. It cited a year-on-year increase in drilling rigs by 374 units to 824 rigs in the week of March 31.
Some OPEC officials have also expressed concerns over the commitment of Russia—the biggest non -OPEC participant in the production cuts—to pursue the effort.
The Eurasian nation is holding consultations with local companies to decide if it will renew its pledge to cut production in May, one OPEC official said.
But the OPEC report said Russia only carried cuts of 130,000 barrels a day in March—compared with a pledged 300,000 barrels a day. It also reversed its forecast for annual Russian production to increase by 40,000 barrels a day from a previously expected contraction of 20,000 barrels a day in 2017, following the startup of three new projects.