Estimates for OPEC production in March are trickling in and they show that OPEC crude production is continuing to rise MoM, despite concerns over Iran, and in line with our expectations (see Increasing Oil Price Forecast – But Only to USD 105/bbl of 20 March). The average OPEC production increase in March over February was put at 0.2mmb/d, with current estimates for OPEC crude production ranging from 30.95 mmb/d (EIA) to 31.53mmb/d (MEES). That MoM change reflects sharply increased production from Iraq (+0.25mmb/d), now that new southern export capacity has been commissioned, another 0.1mmbd/d or so from Libya together with partially offsetting falls of around 0.1mmbd/d from Angola and a minor softening in production from Iran.
The EIA published its monthly supply/demand outlook yesterday. That showed a reduction in estimated global liquids demand for 2012, by 0.15mmb/d, and an increase in non-OPEC liquids production, of 0.21mmb/d. Directionally, that is the precise opposite of the core part of the current bull case for oil prices.
The reduction in demand effectively translates into an equivalent decrease in the call on OPEC crude and the EIA’s forecast now shows the previously expected draw of 0.26mmb/d turning into a build of 0.15mmb/d.
Unlike the other major external forecasters, the EIA incorporates a forecast for OPEC crude production rather than treating it as a residual and it assumes that OPEC production will fall later in the year. We expect OPEC production to hold up or increase further until there is a significant drop in current oil price levels.
The EIA and OPEC are both due to update their forecasts this Thursday.