OPEC January Crude Output Rises on Gains From Iraq

OPEC oil production rose in January as record Iraqi output helped drive prices near six-year lows.

Production by the Organization of Petroleum Exporting Countries climbed 483,000 barrels a day to 30.905 million a day this month, led by gains in Iraq, Saudi Arabia, and Angola, according to a Bloomberg survey of oil companies, producers and analysts.

Output rose even as oil futures dropped to the lowest level since 2009. OPEC left its production quotas unchanged at a November meeting, prompting speculation that the group will let prices slide low enough to slow U.S. output that’s climbed to the highest in three decades.

“There’s clearly a battle for market share among the members of the group,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone on Friday. “The Iraqis feel entitled to a greater share of the total and have been the most aggressive at discounting.”

Brent for March settlement rose $3.86, or 7.9 percent, to close at $52.99 a barrel on the London-based ICE Futures Europe exchange. It was the biggest gain since April 2009. Brent, the benchmark for more than half the world’s oil, touched $45.19 on Jan. 13, the lowest since March 2009.

Iraqi Production

Iraqi production rose 200,000 barrels a day to 3.9 million this month, the biggest gain after Saudi Arabia, according to the survey. Output climbed as the country added growing Kurdish supplies to its exports, while southern oilfields remain unscathed by Islamic State militants. Iraq is OPEC’s second-biggest producer.

Crude output in Iraq hit a record 4 million barrels a day, Oil Minister Adel Abdul Mahdi said in Baghdad on Jan. 18. The country needs to increase oil production because tumbling global prices have reduced government revenue by about 50 percent, Deputy Prime Minister Rowsch Nuri Shaways said at the World Economic Forum in Davos, Switzerland, on Jan. 21.

“The resurgence of Iraq will be a major these this year,” Mike Wittner, head of oil research at Societe Generale SA in New York, said by phone. “The IS offensive brought the central government and the Kurds together, which led to an agreement that led to increased shipments from the north of the country. I’m sure this was an unintended consequence of attacks.”

Last month’s total was revised 183,000 barrels higher to 30.422 million a day because of changes to the Iraqi and Ecuadorian estimates.

Output in Saudi Arabia, OPEC’s top producer, climbed 220,000 barrels a day to 9.72 million. Shipments to China increased as lower prices encouraged crude storage, according to a person familiar with the matter.

New King

Oil prices continued to slide after the death of King Abdullah on Jan. 23. His successor, King Salman, calmed the market by saying that he will continue his predecessor’s policies and retaining Oil Minister Ali Al-Naimi.

The desert kingdom won’t balance global crude markets by itself even as prices fall “too low for everybody” Khalid Al-Falih, the chief executive officer of Saudi Arabian Oil Co., said at a conference in Riyadh on Tuesday. Al-Naimi has said producers outside of the group should trim their output first.

Saudi Aramco and partner Sinopec Group shipped the first gasoline cargo from the new Yasref refinery in Yanbu refinery this month. The plant on Saudi Arabia’s Red Sea coast will have crude-processing capacity of 400,000 barrels a day.

“The Saudis continue to play a long-term game,” Kilduff said. “They want to squeeze other producers out.”

Angolan Project

Angolan production increased 190,000 barrels a day to 1.81 million, the third-biggest advance in January. Eni began first production from the West Hub development project in Block 15/06 in December.

Iranian production rose 10,000 barrels a day to 2.78 million this month, the first increase since June. The nation pumped more than 3.1 million barrels a day from 1991 until July 2012, when additional sanctions were imposed on the Islamic republic. Iran, the group’s second-biggest producer in June 2012, is now in fourth place.

Libyan output fell 150,000 barrels a day to 300,000 in January, the lowest level since June and the biggest decline in the survey. Production has slumped since the 2011 rebellion that ended Muammar Qaddafi’s 42-year rule. The country pumped 1.585 million in January 2011.

OPEC ministers are scheduled to convene June 5 in Vienna.

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