Worlds three biggest oil producers close to record highs in May ahead of cartel decision
- Opec quota decision to be made on 5 June
- US output hits 43-year high in May
- Russia shows no sign on slowing, hits near-monthly record
As representatives from Opecs 12 member countries prepare to meet in Vienna on 5 June to discuss oil production quotas, the worlds three biggest crude-producers are going at full pelt.
The US, Saudi Arabia and Russia have been reported to be pumping crude at record, or near-record, highs, while the Brent crude price has stabilised somewhat between $60 and $70 a barrel.
Saudi Arabia made a crucial decision in November 2014 to maintain a high level of oil production and its two rival major producers have continued to ramp up output in the past six months.
Saudi Arabias Oil Minister Ali al-Naimi told reporters on 1 June that the Riyadh-led Opec strategy of maintaining production was working, setting the tone for the meeting where no major change in policy is expected.
Demand is picking up. Supply is slowing. This is a fact. The market is stabilising, said Al-Naimi as he arrived in Vienna for discussions on Opec output levels. You can see that I am not stressed, that I am happy.
Opec is expected to keep its official production target of 30 million b/d when the 12-member cartel makes its decision on 5 June.
Although there have been calls from smaller Opec producers to cut output to support the market, Saudi Arabia is the only country with enough clout to have any impact on prices.
Russias energy minister reported that production of oil and natural gas condensate reached 10.71 million b/d in May, showing that the Russian oil industry is still going at full pelt.
US oil production surged to a 43-year high of 9.57 million barrels a day (b/d) in May, according to the Department of Energy, despite a 50 per cent reduction in active US oil rigs.
Saudi production was unchanged from April at 10.25 million barrels of oil equivalent a day (boe/d), according to a survey carried out by Bloomberg.
According to a survey by UK news agency Reuters, Opec production was at a two-year high of 31.22 million b/d in May far ahead of the current quota. Increased Angolan exports and close-to-record Saudi and Iraq output offset outages in smaller producers.
The Brent crude price has increased to about $65 a barrel from a low of close to $45 a barrel in January and there are signs the rapid rise in US crude production has slowed.
When Opec decided not to cut output in November, Saudi Arabia outlined its strategy to moderate runaway growth from high-cost non-Opec suppliers, as well as stimulate global oil demand. The kingdom seems to be on track to achieve these goals, said Barclays analysts in an oil market outlook released on 1 June.
Barclays added that further swift gains in the oil price threaten to derail its plan.
With economic growth data in key consumption centres still lacklustre, higher prices could still weigh on oil demand growth, while non-Opec suppliers with a compressed cost curve [more elastic] could add more supply, said the bank.