OPEC reported a increase in its oil production in September to the highest in at least eight years and raised its forecast for 2017 non-OPEC supply growth, pointing to a larger surplus next year despite the group's deal to cut output. The Organization of the Petroleum Exporting Countries pumped 33.39 million barrels per day (bpd) last month, according to figures OPEC collects from secondary sources, up 220,000 bpd from August, OPEC said in a monthly report on Wednesday.
The figures underline OPEC's challenge in seeking to restrain supplies for the first time since 2008 to curb a persistent supply glut and prop up prices. Oil is trading near $53 a barrel LCOc1, less than half the price hit in mid-2014. "Inventories stand near all-time highs worldwide," OPEC said in the report. "Although in recent weeks these high levels have been slightly drawn down."
To speed up a rebalancing of the market, OPEC agreed at a meeting in Algeria on Sept. 28 to cut supply to between 32.50 million bpd and 33.0 million bpd. The group hopes to finalize details, including how much each of the its 14 members can pump, at a meeting in November. The report showed the supply boost in September mostly came from Libya and Nigeria, which are restoring output after disruptions, and from Iraq, which has questioned the accuracy of OPEC's secondary-source figures.
OPEC uses two sets of figures to monitor its output: figures provided by each country, and secondary sources which include industry media. The reason why two sets of figures are used is because of past disputes over how much countries were really pumping. Iraq told OPEC it produced 4.775 million bpd in September, while the secondary sources put output at 4.455 million bpd. From Iraq's point of view, joining the OPEC supply cut deal from the higher figure would be more favorable.
Baghdad has taken issue with the gap between the two sets of figures. Iraqi Oil Minister Jabar Ali al-Luaibi called a separate briefing on the day of the Algeria meeting to complain about the gap. That aside, OPEC's report is the latest to show output is hitting new peaks. The September figure is the highest since at least 2008, according to a Reuters review of past OPEC reports. In the report, OPEC also raised its forecast of non-OPEC supply next year, saying output from outside the group would rise by 240,000 bpd, up 40,000 bpd from an earlier forecast due to a higher forecast for Russia.
With demand for OPEC crude in 2017 expected to average 32.59 million bpd, the report indicates there will now be an average surplus of 800,000 bpd if OPEC keeps output steady. Last month's report pointed to a 760,000 bpd surplus. OPEC made no change to the global oil demand outlook, predicting demand growth of 1.15 million bpd in 2017.
China's state planner has drawn up a five-year plan to develop the China Railway Express to Europe, improving customs clearance and infrastructure, it said on Wednesday. The network was crucial to China's "One Belt, One Road" policy, spearheaded by President Xi Jinping to increase connectivity and cooperation between China and the rest of Eurasia, it said.
The 2016-2020 plan is the first top-level scheme to be proposed for the corridor, which has grown in popularity as firms seek shorter goods travel times, the National Development and Reform Commission (NDRC) said on its website. Local governments have launched rail services over 39 lines linking Chinese cities like Chongqing to destinations in Germany, Poland and the Netherlands, but Beijing this year moved to take control of the network, rebranding the trains and containers under the "China Railway Express" brand.
The NDRC said the network, seen as an alternative to shipping by sea or air, had been plagued with high costs, disorderly competition and a supply-demand imbalance, creating a need to strengthen regulation. The state planner would focus on developing three routes and 43 transit hubs on the network as well as improve the services and infrastructure, it said.
Russian Energy Minister Alexander Novak said on Wednesday that annual trade volume with Turkey would be increased to $3 billion. “We have a long way to go. We will use a variety of mechanisms for this,” Novak said at the opening of the 18th joint meeting of the Russia-Turkish Business Council in Istanbul.
He stated that setting up a positive issue regarding bilateral trade and economy with Turkey would be beneficial for both countries' future relations. Referring to the year-long crisis between Ankara and Moscow following a jet downing incident last year, the Russian minister admitted “our relations were restructuring incrementally”.
“[There will be] new agreements on cooperation in economy, culture and science sectors. We are developing our business in new technologies,” he said, adding that a commission for international cooperation would begin its work soon. Russia-Turkey relations seem to be back on the track as Russian President Vladimir Putin and Turkish President Recep Tayyip Erdoğan signed several agreements in Istanbul this week alongside the 23rd World Energy Congress. Both countries have shared a common view on the Syrian crisis, and stressed on an immediate solution for the humanitarian crisis.
Turkey and Russia could establish a joint venture to construct the second line of the Turkish Stream gas pipeline project, said Dr. Volkan Özdemir, head of the Institute for Energy Markets and Policies. Özdemir noted that there is no problem on the first line of the gas pipeline Project, as President Recep Tayyip Erdoğan and his Russian counterpart signed a deal to establish the line on Monday.
According to the agreement, the construction will start in 2017 and end in late 2019. The intergovernmental deal on the pipeline also envisioned the construction of two underwater legs in the Black Sea, with the annual capacity of 15.75 billion cubic meters each.
A Russian company will operate the offshore segment, while a Turkish company will run the onshore segment, he said.