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. Last Updated: 07/27/2016

Higher OPEC Output Pressures Prices




LONDON -- OPEC oil production looks likely to rise by 773,000 barrels a day in April including 225,000 bpd from Iraq, a leading tanker tracker told clients Wednesday.


Geneva-based Petrologistics said preliminary expectations for OPEC supply in April were 27.555 million bpd compared to 26.782 million bpd in March.


It said the 10 OPEC members that eased supply restraints in April were likely to pump 25.005 million bpd from 24.457 million in March - a rise of 548,000 bpd.


Under OPEC's old deal that expired in March the Petrologistics figures put leakage at 1.481 million bpd and compliance with 4.316 million bpd of supply curbs at 66 percent.


Under the new higher output target, and including Iran, leakage is 313,000 bpd and compliance with the remaining 2.6 million bpd of supply restraint is 88 percent, according to Petrologistics.


Nine OPEC members agreed in March to raise supply by 1.45 million bpd. Iran, which opted out of the agreement, said it also would pump more oil. Including Iran, the OPEC 10 is targeting supply of 24.692 million bpd from 22.976 million - an increase on paper of 1.7 million.


World oil prices tumbled Wednesday on profit-taking based on an increase in U.S. oil inventories and the likelihood of OPEC's April output being above its supply target, traders and analysts said.


North Sea benchmark Brent Blend crude futures for June delivery ended the session down 33 cents at $23.00 per barrel on London's International Petroleum Exchange. Concurrently, U.S. June light crude futures lost 66 cents to stand at $24.67.


"The move up last week went too far," said a trader on the IPE floor. "There's been a lot of profit-taking on the back of U.S. inventory data and OPEC output estimates."


Oil prices have been supported over the last week on expectations of improved demand for refined products and a big draw on stocks in the United States.


But prices moved downward Tuesday as the reverse picture was painted by a bearish overnight inventory report from the American Petroleum Institute.


The API issued its weekly report late Tuesday showing the fourth consecutive week of build in U.S. crude stocks and by higher-than-expected volumes.


API reported crude inventories jumped 4.3 million barrels in the week to April 21 against forecasts of a 1.6 million barrel rise. Distillates, including heating oil, made a surprise increase of 224,000 barrels versus estimates of a fall of 750,000 barrels.


Analysts said the data reinforced bearish sentiment, as did separate data from the U.S. Department of Energy that showed U.S. crude stocks to the week ending April 21 up 5.1 million barrels to 307.4 million barrels.


After Geneva-based Petrologistics, a leading tanker tracker, told clients Wednesday that OPEC oil production was likely to increase, sentiment took a definite turn for the worse, they said.


Overproduction and quota busting in the cartel has kept prices jittery and uncertainty increased Monday when the United Nations reported that Iraqi oil exports rose by 170,000 bpd for the week to April 21 to total 2.34 million bpd.


It was the second straight week Iraq outstripped what the United Nations says was its sustainable export capacity.