Since the nuclear deal was signed, Iranian production has increased by almost one million barrels per day.
In the United States, output has risen by nearly a third in the last two years, to a U.S. record of 10.8 million bpd.
“A wait-and-see approach is taking hold across the energy complex as market participants buckle down ahead of next week’s crunch OPEC/non-OPEC meeting”, said Stephen Brennock, analyst at London brokerage PVM Oil Associates. That could give OPEC some breathing room to boost output while still remaining collectively compliant with its cut commitment, though this would likely spark a bitter intra-OPEC market share battle. Later this week, inventory data from the United States will also be followed closely especially following last week’s surprise increase. “The U.S. tried it last time against Iran, but oil prices got to $140 a barrel”. Sliding Venezuelan output has added to supply concerns.
The latest demonstration that OPEC could, if given the right circumstances, easily fulfill Christyan Malek’s forecast, came Monday from a source in Saudi Arabia, who reported that the kingdom raised oil output to a little more than 10 million barrels per day (bpd) in May, even though that number was still below its quota.
Benchmark Brent crude was down 35 cents at $76.11 a barrel by 0745 GMT.
“The US is important to us, but. we have not received any official communication, or even unofficial communication, from the administration”, said Suhail Al Mazrouei, the current head of OPEC and energy minister of the United Arab Emirates.
The precise level of spare capacity available depends in part on how it is defined.
For 18 months, OPEC and its allies have curbed production in the hopes of stabilizing markets and supporting prices. They project world oil demand growth in 2017 to 1.65 million barrels per day (mb/d), putting global demand at a record 97.20 mb/d.
Markets were held back by signs that output is rising from top producers Russian Federation, the United States and Saudi Arabia.
“So were they to raise by 1 million bpd, then 1.3 million bpd is left, scraping the low end of the range historically and uncomfortably tight given the high and rising geopolitical disruption risk”, McNally said.
The uncertain outlook suggests that OPEC members may be in no rush to relax their output cuts when they meet next week.
Meanwhile, independent secondary sources used by the organization to track production estimated OPEC’s May output at 31.87 million b/d.
Crude has been generally supported by healthy demand and voluntary production cuts led by OPEC.
In the United States, output has risen by nearly a third in the last two years, to a record of 10.8 million bpd.
Production fell in Nigeria, Libya and Venezuela, but increased in Saudi Arabia, Algeria and Iraq.