Rising OPEC Oil Output Shows Challenge of Curbing Production

By BENOIT FAUCON for the Wall Street Journal.

LONDON—OPEC pumped oil at record-high volume last month, the International Energy Agency said Tuesday, and officials from three of its member countries say they plan to raise output in the near future.

The increased production shows how much work the Organization of the Petroleum Exporting Countries must do to achieve production cuts it agreed to last month in an attempt to end a crude glut that has depressed prices for two years.

“Now the real work starts,” the IEA, which advises industrialized nations on energy policy, wrote in its monthly report. The market—if left to its own devices—may remain in oversupply through the first half of next year, it said.

But the agreement exempted Libya, Iran and Nigeria, OPEC members with recent oil-industry troubles, from any near-term cuts. Now they are presenting a challenge by boosting output at a time when the cartel wants to collectively pull back.

Last month, production from Iran, Libya and Nigeria increased by a collective 120,000 barrels a day over August levels, the IEA said. In the near term, officials from those countries say they aim to boost daily production by another 580,000 barrels or so—an amount about equal to the total volume OPEC said it would cut.

Further increases from those countries “would suggest that bigger cuts would have to be made by others, such as Saudi Arabia,” the IEA said. Saudi Arabia, OPEC’s largest producer, saw output fall by about 20,000 barrels a day to 10.58 million barrels a day from August to September, the IEA said.

Rising production in Libya, Nigeria and Iraq is due to a convergence of disparate factors. In Libya, years of fighting that blocked oil ports ended recently when a militia took control of key export facilities and agreed to restart shipments. The government also plans to link long-dormant oil fields to a new export pipeline. Libyan officials say the country’s production could rise from 300,000 barrels a day in August—the baseline that OPEC used in calculating its proposed production cap—to 700,000 barrels a day.

After years of depressed oil production under the weight of Western sanctions, Iran is slowly ramping up its exports now that those penalties are lifted.

Nigeria, where oil thieves and rebel groups have sabotaged oil facilities, is adding up to 200,000 barrels a day after it repaired a key pipeline that had been damaged and was out of commission for months.

Another challenge for OPEC is dealing with Iraq, which has protested the data OPEC is using to calculate production. Iraq says the independent analysis firms OPEC relies on understate Iran’s recent production and could result in the country being forced to adopt an unfairly low cap. The IEA said Iraq increased output by 90,000 barrels a day last month over the previous month.

OPEC is also pinning hopes for reducing the crude glut on producers outside the group. Speaking on Monday at an energy summit in Istanbul, Russian President Vladimir Putinsaid Moscow could join the cartel’s production cuts. But last month, his country boosted production of crude and natural-gas-liquids by about 400,000 barrels a day to a post-Soviet high, the IEA said.