OPEC crude production declines when U.S. output not collapsing with lower rig count: report

OPEC's crude production declined last month while the oil output from the United States began leveling off with a decreasing rig count, according to the cartel's monthly report released on Monday.

The crude oil output of the Organization of the Petroleum Exporting countries (OPEC) declined by 0.14 million barrels per day to 30.02 million barrels per day in February compared to January. This was due to the lower crude production from Iraq, down by 0.78 million barrels per day from the previous month, and Nigeria. However, Saudi Arabia increased its production.

Due to the output decline, the share of OPEC crude oil in total global production decreased slightly to 32.1 percent in February.

However, OPEC saw a trend of declining rig count in the United States, quoting Baker Hughes's statistic as saying "the U.S. rig count declined by 335 rigs, during four weeks in February to 1,348 rigs," noting that it is the 13th consecutive week of total decline and the lowest reading since the end of 2009.

"Two hundred and thirty-seven oil rigs have been idled until now, leaving 986 active rigs on Feb. 27, the lowest number of oil rigs in use since June 2011 and down 37 percent from Nov. 26, 2014," the report said.

OPEC believes that the low oil price and high costs are the factors behind the decreasing number of active rigs in United States, which is especially troubling for shale producers. Therefore, if the trend continues, the cartel is expecting a drop in U.S. production by late 2015.

Abdalla Salem el-Badri, the secretary general of OPEC, said last week that collapsing prices was hurting the U.S. shale-oil industry and that a global pullback on investment could lead to a shortage that will push the market upward again.

OPEC refused to cut its output to face the low-price oil market, and seems to be extending this policy.

However, so far, the oil output from the non-OPEC suppliers, especially the United States, the producer which is expected to have the highest output growth in 2015, seems to be only leveling off, rather than collapsing.

The non-OPEC supply averaged an amount of 57.16 million barrels per day last month, no big change from the previous month, while U.S. oil output growth stayed at 0.82 million barrels per day in 2015, the same as in February.

Some analysts suggest that the productivity and the technology of oil pumping seems to be advancing in the United States, which could somehow compensate the declining number of active rig counts.

U.S. Energy Information Administration (EIA) data shows improvements in productivity, with production per rig from new wells rising in the past year by around 20 to 30 percent in some regions of the United States

Though U.S. shale is a higher-cost source of oil than oil in the Middle East, it might turn out to be more resilient than people expect.

Oil prices have started to stabilize around 60 U.S. dollars a barrel in past weeks.

A World Bank report suggested the OPEC's influence would be affected due to changing market conditions and technological advances.

Some analysts forecast that U.S. oil production might continue growing this year and next, if there is a rebound in prices to about 60 U.S. dollars per barrel. Endit