VIENNA, Austria (Bloomberg) -- OPEC’s new free-for-all production stance could lift the lid on millions of barrels of additional crude supply next year.
“Everyone does whatever they want” now that the Organization of Petroleum Exporting Countries has effectively abandoned its formal production target, Iranian Oil Minister Bijan Namdar Zangeneh said after the group met on Friday. What Iran wants is to revive exports by about 1 MMbopd when sanctions are removed next year. It’s not the only member with potential to swell the global oil surplus, with millions of barrels of capacity lying unused under the sands of Saudi Arabia and Libya.
“It means more OPEC oil next year,” Jamie Webster, a Washington-based oil analyst for IHS Inc., said of the organization’s Dec. 4 decision. “OPEC is not cutting. With Iran looming, as well as largely only upside risk for Libya, the smart money is on more, and not less, production.”
Extra Barrels
Libya’s output been strangled by the rivalry of two separate governments, protests at oil fields and attacks from Islamist militants. The holder of Africa’s biggest crude reserves is pumping at roughly a quarter of its pre-war capacity of about 1.6 MMbpd. The International Energy Agency currently doesn’t count the nation’s shutdown oil fields as “spare capacity” and said October’s recovery in output to 430,000 bopd “may prove fragile.”
Saudi Arabia, OPEC’s biggest and most influential member, has for years held back output in reserve for use during a crisis. It was idling about 2 MMbopd, or 16% of total capacity, for this purpose in October, the IEA estimates.
Saudi Arabia may choose to tap those unused reserves as it faces increasing output from regional rival Iran next year, rather than making way for those barrels, according to Mike Wittner at Societe Generale SA. Discarding OPEC’s commitment to adhere to any particular limit may signal Saudi Arabia’s readiness to do exactly that.
“If Iran is very aggressive in its return you are likely to see Saudi push with incremental production,” said Webster.
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