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OPEC production fell in June


OPEC production is seen to have dropped MoM in June, according to estimates by the technical press, with Libyan production in particular weaker MoM. Argus and MEES put June OPEC production down 340kb/d and 370kb/d MoM, respectively.

Libyan production is estimated some 170-250kb/d lower MoM in June on continued unrest and labour disruptions. Industrial action at oil terminals reduced production and forced shut-downs, including at Repsol’s 350kb/d El Sharara field. Production at Eni’s (Hold, TP EUR 18.50) 100kb/d Elephant field is also reportedly affected.

Iraqi production is also estimated to have fallen in June as a result of pipeline sabotage in northern Iraq on worsening relations between the central government in Bagdad and the autonomous Kurdistan Regional Government. While exports from Southern Iraq were impacted by bad weather. Argus puts Iraqi production in June down 50kb/d while MEES has production down 170kb/d MoM.

Both publishers have production in Saudi Arabia, the UAE and Qatar higher MoM, as domestic demand for rises over the summer on increased power consumption for air conditioning. Saudi production has particularly picked up since the low in January.

MENA region unrest is impacting production and supporting oil prices. However, global markets continue to be over-supplied, while inventory levels continue to build, we believe. While that holds true, we see the price risk as lying to the downside.

The EIA publishes its Short-Term Energy Outlook today and OPEC’s Monthly Oil Market report is scheduled for publication tomorrow. The IEA, which is generally regarded as the most authoritative of the major public forecasters, is expected to release the July Oil Market Report on Thursday. That report will contain projection through to end-2014.

Net managed money futures and options positions on the ICE in Brent, generally reckoned to be the most directionally driven speculative category, rose 8.6% or 11,721 positions in the week to 2 July to close at 148,530 positions. Over the same week, Brent rose 2.7% (USD 2.74/bbl) to USD 104.00/bbl. At the time of writing, the CFTC had not reported the equivalent figures for positions on the NYMEX in WTI due to the 4 July national holiday.

Colin Smith, Marc Jacouris
VTB Capital analyst

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