As we count down the days til OPEC’s next meeting in Vienna (30 days now, for those keeping track), at which the cartel is expected to finalize the details of a production cut it first floated in Algiers last month, petrostates the world over are pumping crude at a breakneck pace. Take OPEC’s members, themselves, who, as Reuters reports, are set to hit record high production numbers this October:
Supply from the Organization of the Petroleum Exporting Countries has risen to 33.82 million barrels per day (bpd) in October from a revised 33.69 million bpd in September, according to the survey based on shipping data and information from industry sources. That would be 820,000 bpd above the top end of a target output range OPEC agreed to adopt at a Sept. 28 meeting. According to analysts, production near 34 million bpd would prolong the supply surplus weighing on the market.
“With OPEC production creeping up toward 34 million barrels a day, a production freeze guarantees that the oil market will remain out of balance throughout 2017 and into 2018,” said David Hufton of oil broker PVM.
Much of this bump in OPEC’s output came from the restoration of supply disruptions in Nigeria and Libya, but Iraq also showed its resolve to fight for market share by increasing its own exports. This new October high comes after OPEC’s September production also set a record.
But outside the cartel, Russia is also buckling down and working on increasing its own production. As another Reuters report notes, state-owned Lukoil just opened a new field in the Caspian Sea, the latest of a recent spate of new projects for Russia:
Russian President Vladimir Putin, who has pledged to join a global pact to cap oil output, gave the green light on Monday to start production at a new Caspian Sea field owned by the country’s No.2 oil producer Lukoil. The launch, the second major oil field opened by Russia in a week and the fourth this year, puts a further question mark over oil producers’ pledges to limit output in order to support global oil prices. […]
Russian oil production – already the world’s biggest – is expected to hit another post-Soviet high of 547 million tonnes this year, or 10.95 million barrels per day (bpd), rising to 548 million tonnes next year.
Ahead of any agreement to cut output or “freeze” production at current levels, in the short-term it makes sense that these countries are all trying to squeeze as much oil out of the ground as possible. But the underlying problem for these petrostates is still the global glut (which precipitated the collapse in crude prices in the first place). Every extra barrel that OPEC or Russia produces now is another that they’ll have to reduce output by if and when they ever agree on some sort of market coordination strategy.