OPEC pumping oil at record levels ahead of crunch meeting

Output by OPEC oil producers has reached record levels, the International Energy Agency said Thursday, raising fears a global oil glut will continue to weigh on markets unless the cartel agrees on a cut.

Production by the 14 members of OPEC rose to a record 33.83 million barrels a day in October, the IEA said, just weeks ahead of talks aimed at hammering out a deal to curb production.

In a surprise move, OPEC (the Organization of the Petroleum Exporting Countries) members, led by oil kingpin Saudi Arabia, agreed in Algiers in September on a deal to trim production, sending crude prices surging.

The accord aims to stabilise prices that have dramatically fallen since 2014, deeply hurting producers across the board, but its details are to be determined at OPEC’s meeting on November 30 in Vienna.

The Paris-based IEA, which advises oil consuming nations on energy issues, said OPEC had hiked its output for five months running, led by Iraq and Saudi Arabia.

“October proved to be another record-breaking month for OPEC, with crude oil output rising 230,000 barrels a day to 33.83 million barrels a day,” it said in its monthly report on the oil market.

Its October level was “well in excess of the high end of the proposed output range” of between 32.5 mb/d and 33.0 mb/d agreed by OPEC in Algiers, the agency said.

“This means that OPEC must agree to significant cuts in Vienna to turn its Algiers commitment into reality,” it added.

Production has outpaced demand over the past two years, with the resulting supply glut hammering prices from highs of more than $100 a barrel in June 2014 to near 13-year lows below $30 in February this year.

Prices are currently hovering above $45 a barrel.

The IEA said that if OPEC implemented its production ceiling, the market would “move from surplus to deficit very quickly in 2017”, although the stock overhang would take time to run down.

But it added that “if no agreement is reached and some individual members continue to expand their production, then the market will remain in surplus throughout the year, with little prospect of oil prices rising significantly higher”.

– Hike in non-OPEC output –

Production by countries outside of OPEC, meanwhile, is set to fall this year but is expected to rise in 2017 more than previously expected, led by Russia, the IEA said.

Supply growth by non-OPEC countries will increase by 500,000 barrels a day next year, an increase of 110,000 barrels a day from the IEA’s previous forecast.

As well as Russia, Brazil, Canada and Kazakhstan are set to drive non-OPEC supply growth in 2017.

“This means that 2017 could be another year of relentless global supply growth similar to that seen in 2016,” the report said.

Analysts said Donald Trump’s victory in the US presidential election could also increase pressure on OPEC to cut production.

Jeffrey Halley, senior market analyst at OANDA, said the president-elect’s campaign pledges, if implemented, may lead to higher oil production in the United States.

“Less red tape and taxes should theoretically lead to higher oil production in the United States.

“Not good news for OPEC and non-OPEC members trying to thrash out a production cut.

“Oil’s post election afterglow may turn black gold to fools gold as the street gets back to reality,” he said in a note to clients.