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Friday, September 21, 2018

OPEC 32 mbd sustainable crude oil production capacity - EIA

According to IEA, sustainable OPEC crude oil production capacity is now 32 mbd including 3.2 mbd from Iraq. This is 10.3 mbd above the OPEC quota of 21.7 mbd and 8.6 mbd above the April 2002 production.

More than 80% of the spare capacity is in the Middle East. Saudi Arabia alone stands for more than a third of the spare capacity. The April figures are, however, special as Iraq only produced 1.6 mbd or almost one million barrels less than normal production. The Iraqi stop in oil production caused only minor market reactions, even if it probably helped the other OPEC countries. According to IEA, the ‘call for OPEC oil plus stock changes’ will be 24.8 mbd in the 2nd  quarter of this year, 0.3 mbd below thelevel in the 1st  quarter of 2002. This means that OPEC can approximately maintain the same production in the 2nd quarter as it did in the 1st quarter, if we assume that there will be no stock changes. IEA project a 0.9 mbd increase in call for OPEC oil in the 3rd quarter and an increase of another 0.9 mbd in the 4th quarter. This is to meet increased demand in the 3rd quarter of 1.3 mbd and 1.2 mbd in the 4th quarter. The balance of 0.4 mbd in the 3rd quarter and 0.3 mbd in the 4th quarter is assumed to come from non-OPEC countries.

We have previously demonstrated the almost perfect correlation between Middle East oil production and VLCC rates. Assuming that this correlation continues, VLCC rates in the 3rd quarter may move above USD 15,000 per day and rates in the 4th quarter may move above USD 20,000 per day, possibly above USD 25,000 per day.