OPEC oil output fell further from its highest in four years in July as U.S. and European sanctions cut supply from Iran to the lowest in more than two decades, a Reuters survey showed on Monday.
Supply from the 12-member Organization of the Petroleum Exporting Countries has averaged 31.18 million barrels per day in July, down from 31.63 million bpd in June, the survey of sources at oil companies, OPEC officials and analysts found.
Oil prices declined below $100 (U.S.) a barrel in June, a level favoured by Saudi Arabia and other OPEC members, prompting speculation they might trim supply to prop up prices. There is little evidence to suggest this has happened in July, although the drop in output is larger than some expected to see.
“The decline by 450,000 barrels per day to 31.2 million bpd is more than expected and almost evaporates the supply surplus,” said Carsten Fritsch, analyst at Commerzbank in Frankfurt.
OPEC’s production has declined for three months since it pumped 31.75 million bpd in April, the highest since September 2008, based on Reuters surveys. The group is still pumping almost 1.2 million bpd more than its target of 30 million bpd.
The biggest drop this month came from Iran, whose crude is subject to a European Union embargo that started on July 1. The embargo also bars EU insurance firms from covering Iran’s exports, hindering imports by some non-EU buyers.
“In July, a lot of buyers didn’t take crude as they were trying to get the insurance sorted out,” said an industry source. “We will never know by exactly how much as the Iranians won’t tell us.”
According to the survey, Iran’s supply slipped by 150,000 bpd to 2.80 million bpd in July. That would be its lowest output since 1988, when it pumped 2.24 million bpd, according to figures from the U.S. Energy Information Administration.
The U.S. and European sanctions have pushed Iran from its traditional position as OPEC’s second-largest producer to rank third behind Iraq, which this year is benefiting from a long-awaited expansion in export capacity.
Iraq, after sharply boosting exports earlier this year as new export outlets in the south of the country came into operation, has seen a drop in shipments of Kirkuk crude from its northern fields in July.
Output this month has fallen by 30,000 bpd, partly a result of Iraq’s Kurdistan region announcing in April it was halting its exports because firms operating there were not getting paid by the central government.
Rising Iraqi supplies earlier this year had helped to keep a lid on oil prices as Western sanctions targeted Iran’s exports.
As well as Iran and Iraq, Angolan output has fallen as oil-field maintenance curbed exports from Africa’s second-largest producer. Still, export schedules indicate output will rebound to above 1.8 million bpd in August.
Libyan production, which had recovered close to the level it attained before the 2011 civil war, was hit early in the month when protests by groups demanding greater autonomy for eastern Libya disrupted exports.
Saudi Arabia trimmed supply slightly because of lower demand from some customers, such as in the United States, sources in the survey said. It still kept output at 10 million bpd, near the highest rate in decades.
Sources say Saudi exported fewer barrels to the U.S. due to the shutdown of the crude unit at Motiva’s Port Arthur refinery. Motiva is a joint venture of Royal Dutch Shell and state-owned Saudi Aramco.