Saudi Arabia adds half a Bakken to global oil market in a month

GRANT SMITH

VIENNA, Austria (Bloomberg) -- Saudi Arabia led a surge in OPEC crude oil production in March.

The nation boosted crude output by 658,800 bpd in March to an average of 10.294 MMbpd, according to data the country communicated to the Organization of Petroleum Exporting Countries’ secretariat in Vienna. That’s about half the daily production from the Bakken formation in North Dakota that’s among the fastest-growing regions for shale drilling in the U.S.

Oil prices have rallied almost 18% in New York this month on stronger fuel demand and as a record decline in U.S. rigs fanned speculation that the nation’s production will slow from its highest in three decades. Prices collapsed almost 50% last year as Saudi Arabia led OPEC in maintaining production in the face of a global glut rather than make way for booming U.S. shale output.

Rising demand and weaker U.S. output in coming months will whittle away the global market’s surplus, the group said.

“Higher global refinery runs, driven by increased seasonal demand, along with the improvement in refinery margins, are likely to increase demand for crude oil over the coming months,” OPEC’s Vienna-based research department said. “Given expectations for lower U.S. crude oil production in the second half of the year, these higher refinery needs will be partially met by crude oil stocks, reducing the current overhang in inventories.”

External Sources

The output figure for Saudi Arabia is in line with a level of 10.3 MMbpd announced by Oil Minister Ali Al-Naimi in Riyadh on April 7.

The Bakken formation pumped 1.1 MMbopd in February, according to data from the North Dakota Industrial Commission.

OPEC’s data compiled from external sources showed an increase of about half the amount reported by Saudi Arabia, and significantly lower output levels for the organization as a whole. Saudi output rose by 346,800 bopd in March to 10.01 MMbopd, according to these figures, which OPEC describes as being compiled from “secondary sources.”

OPEC’s collective production increase by 811,800 bopd last month to 30.79 MMbopd as the Saudi boost was amplified by higher output from Iraq, the secondary sources show. Iraq restored production by 318,800 bopd to 3.63 MMbopd.

Saudi minister al-Naimi reiterated on April 7 that OPEC will only pare output to rebalance the global market if other producers share the burden. Al-Naimi has said several times since OPEC’s Nov. 27 decision that the group’s lower-cost supplies shouldn’t be curtailed to make room for higher-cost producers.

OPEC reduced projections for supply growth from outside the group in 2015, by 165,000 bopd to 680,000 bopd. Some of the reduction was concentrated in the U.S., where growth for 2015 is now estimated at 740,000 bopd compared with 820,000 bopd in last month’s report.

As a result of these lowered expectations, OPEC raised estimates for the amount of crude its members will need to provide this year. OPEC’s 12 nations are required to pump an average of 29.3 MMbopd this year, about 100,000 bopd more than the group anticipated a month ago. That’s still about 1.5 MMbopd less than the group pumped in March.