OPEC crude production dropped to the lowest level in more than two years in December, led by a decline in Venezuelan output, a Bloomberg survey showed.
Output by the 12-member Organization of Petroleum Exporting Countries decreased 33,000 barrels to an average 29.955 million barrels a day this month from 29.988 million in November, the survey of oil companies, producers and analysts showed. The November total was revised lower by 19,000 because of changes to the Kuwaiti and Ecuadorean estimates.
Production slipped to the lowest level since July 2011 as ministers decided to keep their output target unchanged at 30 million barrels a day on Dec. 4 in Vienna.
“OPEC production has taken a downward direction since September and it’s continuing,” Mohammed al-Shatti wrote in Kuwait Petroleum Corp.’s newsletter in his capacity as an analyst. “OPEC is expected to produce at below the group’s agreed ceiling of 30 million barrels a day in the first quarter of 2014 and that is a major support for the stability of current price levels,” wrote al-Shatti, who is also Kuwait’s national representative to OPEC.
Brent crude for February settlement slipped 41 cents, or 0.4 percent, to settle at $110.80 a barrel on the London-based ICE Futures Europe exchange. Brent is the benchmark grade for more than half the world’s oil. West Texas Intermediate oil for February delivery fell 87 cents, or 0.9 percent, to $98.42 on the New York Mercantile Exchange. The U.S. benchmark grade touched $100.75 on Dec. 27, the highest intraday price since Oct. 21.
Venezuelan production dropped 235,000 barrels a day to 2.45 million this month, the survey showed. The South American country pumped the least crude since October 2011. Resources have been diverted from energy sector into social welfare programs, sending production lower.
Petroleos de Venezuela SA, the state oil company, was purged after a two-month oil strike intended to oust President Hugo Chavez from power in 2003. Nicolas Maduro, who became president in March when Chavez died, has continued his predecessor’s policies.
“It’s hard to see how the situation in Venezuela gets any better,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.4 billion. “Funds have been used to prop up the government instead of maintaining the oil industry since the PDVSA strike in 2003. It’s clear the country is on an unsustainable path.”
Libyan output was unchanged 210,000 in December, the lowest level since September 2011, the survey showed. Production averaged 1.28 million barrels a day in the first six months of this year before tumbling, according to data compiled by Bloomberg. Two years after the war that swept the late Muammar Qaddafi from power, government efforts to revive the oil industry are being stymied by feuding militias and protests.
“Several producers are benefiting from the Libyan production outages,” said Tim Evans, an energy analyst at Citi Futures in New York. “There are higher prices because of Libya’s problems and other producers are also able to increase market share at the Libyans expense.”
Iraqi output increased 100,000 barrels a day to 3.2 million this month, the most since August, according to the survey. The country pumped more crude as it increased links to wells in southern fields. Iraq is the second-biggest producer in OPEC after Saudi Arabia.
The Iraqi government is installing offshore crude loading equipment to help raise export capacity to 4 million barrels a day next year. Iraq also plans to increase crude production capacity by 500,000 barrels a day in 2014 by boosting output at current wells and adding new fields.
Nigeria’s production rose 41,000 barrels a day to 1.931 million in December, the second-biggest gain in the survey. Production is often disrupted by unrest in the Niger River delta, the country’s main oil-producing region.
Saudi Arabian crude output rose 30,000 barrels a day to 9.68 million. The desert kingdom pumped 10 million barrels a day in September, the most in monthly data going back to 1989.
OPEC will hold its next meeting June 11 in Vienna.
“These are the best of times for some OPEC members,” Evans said.