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Crude Economics
Petrostate Production Soars Ahead of OPEC Cut

Oil producers around the world are increasing their production, even as OPEC prepares to cut its collective production this November. OPEC’s total supply increased by 70,000 barrels per day (bpd) to 33.6 million bpd last month, setting a high water mark during a year in which the cartel has fought hard to protect its market share from outside producers like the surprisingly resilient American shale industry. As Reuters reports, Iraq and Libya were the big drivers behind this recent OPEC uptick:

[T]he increase was led by Iraq and Libya. Iraqi state oil firm SOMO and Iraq’s semi-autonomous region of Kurdistan began jointly exporting crude from the Kirkuk oilfield again. This lifted Iraqi supply to market to 4.43 million bpd in September, according to the survey.

In Libya, the National Oil Corporation opened three previously blockaded ports, allowing AGOCO, an NOC subsidiary that operates mainly in eastern Libya, to boost output.

Libya in particular is expected to continue to increase production as it works back towards the 1.6 million bpd it was pumping out under Qaddafi. September’s production was up to 500,000 bpd, and the head of Libya’s state-owned oil company’s measurement department told Bloomberg that he expects the country to add another 100,000 bpd by the end of October.

But OPEC’s oil-soaked members weren’t the only ones pushing toward record production. Russia’s September output increased 4 percent in September to 11.18 million bpd, a post-Soviet record. Last week Venezuela’s oil minister voiced a hope that Moscow might join OPEC in coordinating production, but a production cut looks to be out of the question for Moscow. Russia’s energy minister was recently quoted as saying that “[Russia’s] position is keeping the volume of production at the level that has been reached,” which as we’ve now learned is a record for this era. As the FT notes, Russia’s oil industry is looking a lot healthier these days:

In spite of the sharp fall in the price of oil since 2014, the Russian oil industry is healthy and production, confounding many predictions to the contrary, is growing steadily…Drilling activity itself has actually risen by 25 per cent since 2014, driving a steady rise in Russian oil output even as the rest of the non-OPEC world sees various degrees of declines.

OPEC can talk about cutting production all it likes, but at the moment the only thing petrostates both inside and out of the cartel seem truly committed to is maximizing their own output.

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  • Dale Fayda

    Sounds like yet another slush fund for the CA Democrats. The money is confiscated from virtually ALL private sector employees to be disposed of as the Sacramento bureaucrats see fit. Just like the Social Security General Fund, this money will be used to prop up the failing welfare state.

  • Andrew Allison

    This is a recording: OPEC is irrelevant, and the price of oil is very unlikely to go above $50/bl in the foreseeable future.

  • Jacksonian_Libertarian

    It’s every nation for itself in the selfish OPEC oil cartel. I’m happy to see the free market take over as it’s much more efficient and what’s best for Mankind.

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