Saudi compensates for Iran fall

Opec’s oil output has remained close to its highest since 2008 in June as extra oil from Saudi Arabia and Iraq has compensated for a drop in Iranian supply to its lowest level in more than two decades, a Reuters survey found yesterday. US and European sanctions have pushed Iran from second-largest producer in the Organization of the Petroleum Exporting Countries to rank third behind Iraq. The survey added to evidence that Saudi Arabia is showing no sign of changing its policy of high oil output to support the world economy, despite a fall in crude prices in June below $90 a barrel from near $130 in March. “I don’t see Saudi Arabia cutting production by very much until the Iranian embargo situation is clarified and because of concern about global economic growth,” said Paul Tossetti, senior energy adviser at PFC Energy. Supply from the 12-member Opec has averaged 31.63mn bpd as the end of the month approaches, down from a revised 31.70mn bpd in May, the survey of sources at oil companies, Opec officials and analysts found. Production is down only slightly from its highest in four years. Opec pumped 31.75mn bpd in April, the highest since September 2008, based on Reuters surveys. Opec is pumping 1.63mn bpd more than its official ceiling of 30mn bpd, despite agreeing to stick to that target at a June 14 meeting. With Iranian output falling, other members are seen as unlikely to implement large cutbacks. “Ultimately, as demand seasonally rises in the summer and increasing volumes of Iranian oil come under embargo, the likelihood is that Opec will only need to marginally adjust production lower,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas in London. US crude was up $6.24 a barrel at $83.93 yesterday as European leaders took steps seen as easing the region’s debt crisis. The biggest drop in supplies came from Iran, whose crude is subject to a European Union embargo starting on July 1 that also bars EU insurance firms from covering Iran’s exports. Iran’s supply slipped by 180,000 bpd to 2.95mn bpd in June, according to the survey. That would be its lowest output since it produced 2.81mn bpd in 1989, according to figures from the US Energy Information Administration. Earlier this week, Iran acknowledged for the first time that exports had fallen significantly. According to sources outside Iran, its exports posted the first sizeable decline in March in response to the looming EU embargo. Europe and the US are trying to squeeze the revenues Iran makes from its oil exports to force it to halt a nuclear programme they fear will be used to make weapons, but which Tehran says is for power generation. Exports also declined in Angola due to shipping schedules. Loading programmes suggest output will slip further in July before rebounding in August. from gulf times.