OPEC oil output rises by 110,000 bpd in February, survey finds

Meanwhile, geopolitical tension in the Red Sea also lifted prices, said Tim Snyder, an economist at Matador Economics

By News Desk
March 03, 2024
This image shows the logo of OPEC. — AFP/File

LONDON: OPEC raised its oil production in January despite voluntary production cuts that the group was supposed to be adhering to, according to new data published by Bloomberg.


A Bloomberg survey showed that OPEC’s production rose by 110,000 barrels per day to 26.68 million barrels per day—with Libya accounting for much of the increase as it brought production back online at its Sharara oilfield. Sharara has been closed due to unrest in the country.

Iraq, a chronic overproducer, did lower its February production, but it is still producing more than its agreement with OPEC calls for. The survey showed that the UAE also produced more than its quota.

OPEC voluntarily agreed to deepen its oil production cuts for the first quarter of this year, although several members have been struggling to meet those commitments. Several countries have promised to make up for any overages in subsequent months.

Most analysts predict that OPEC+ will extend its production cuts into the second quarter, and the market is eagerly awaiting the news from the group regarding their plans for April and beyond.

OPEC+’s voluntary production cuts could even be extended through the end of the year, three OPEC+ sources told Reuters earlier this week. The sources said that extending the cuts into the second quarter was “likely”.

OPEC+ members collectively decided to voluntarily cut 2.2 million bpd from the group’s production this quarter, although much of that was production cuts that were already in effect, including Saudi Arabia’s 1 million bpd voluntary cut. Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, has always left the door open to extending the cuts, saying as far back as December that the production cuts could extend beyond March should the market require it.

Meanwhile, oil prices posted weekly gains as traders awaited an OPEC+ decision on supply agreements for the second quarter while also weighing fresh US, European and Chinese economic data.

For the week, Brent added around 2.4 percent following the switch in contract months, while WTI gained more than 4.5 percent.

"The expectation that OPEC+ is going to continue with their voluntary production cuts well into the second quarter of 2024 is the main focus on the market," said Andrew Lipow, president of Lipow Oil Associates.

A decision on extending OPEC+ cuts is expected in the first week of March, sources have said, with individual countries expected to announce their decisions.

"Sticking to the voluntary production cuts until the end of the year would be a strong signal and should therefore be seen as price-positive," Commerzbank analyst Carsten Fritsch said.

A Reuters survey showed the Organization of the Petroleum Exporting Countries pumped 26.42 million barrels per day (bpd) in February, up 90,000 bpd from January.

Meanwhile, geopolitical tension in the Red Sea also lifted prices, said Tim Snyder, an economist at Matador Economics.

The leader of Yemen's Houthis said on Thursday the group would introduce military "surprises" in the region.

U.S. energy firms added oil and natural gas rigs for a second straight week, energy services firm Baker Hughes (BKR.O), opens new tab said in its closely followed report.

The oil rig count, an early indication of future output, rose by three to 506 this week, the highest since September.

On the demand side, Chinese manufacturing activity shrank for the fifth straight month in February, an official survey showed.

Euro zone inflation fell in February according to Eurostat, but both the headline figure and core inflation, which strips out volatile food and fuel prices, just missed analysts' expectations.

Supporting prices, the U.S. personal consumption expenditures (PCE) index showed January inflation in line with economists' expectations on Thursday, reinforcing market bets for a June interest rate cut.

Money managers raised their net long U.S. crude futures and options positions in the week to Feb. 27, the US Commodity Futures Trading Commission (CFTC) said.