The forecast of rampant production presumably may encourage OPEC to extend its output reduction agreement.
Kuwait is the latest nation to make headlines for announcing that it will boost, rather than cut, oil production once the Organization of the Petroleum Exporting Countries (OPEC) output reduction agreement expires in June.
Echoing reports that Russia will likely boost output to record highs later this year, Jamal Jaafar, chief executive officer for state-run Kuwait Oil Co., said his company will raise the Gulf nation's capacity from its current level by 500,000 barrels per day (bpd) – even if OPEC decides to extend the supply cuts beyond June.
He told reporters, "We will continue to increase production capacity because we have a five-year plan to reach 3.65 million barrels a day by 2021, so we can't stop investing in that; we will take advantage of the OPEC-cut deal to perform maintenance on facilities in the fields."
Jamal Jaafar, chief executive officer, Kuwait Oil Co.
We will continue to increase production capacity because we have a five-year plan to reach 3.65 million barrels a day by 2021
He added, "KOC is producing 2.7 million bpd now, and we will maintain this under the deal; at the moment we have the capacity to reach 3.15 million bpd, but we will stick to the OPEC agreement."
OPEC ministers will meet in May to assess the market and decide if they should extend their output cut, and given the number of nations hoping to boost production or outright thumbing their noses at the reduction agreement, it would seem likely that the cartel would opt to keep the restraints in place - if for no other reason than to maintain current prices and support their members' troubled economies.
That said, Kuwait's announcement lends further credence to the opinion in some analytical quarters that OPEC's initiative – which is meager in comparison to the massive global inventories that are keeping prices at the $50-$55 range – is somewhat of a joke.
No sooner did Jaafer make his remarks than Jadalla Alaokali, board member of Libya's National Oil Corp., told Libyan media that his country's crude production exceeded 700,000 bpd and will keep rising thanks to improved working conditions.
He calculated that Libya's crude production is due to reach 1.2 million bpd by August and 1.7 million by March 2018. This is higher than the 1.6 million bpd it pumped in 2011 before the onset of fighting between government and militias caused production to dramatically decline.
Meanwhile, Bloomberg reported that U.S crude supplies have climbed 9.53 million barrels to 518.1 million, the highest level in weekly data going back to 1982 and more than twice the 3.5 million-barrel gain forecast by analysts surveyed by the agency.
Adam Wise, managing director, oil & gas for John Hancock, remarked, "The builds are probably explained by increased OPEC output at the back of the year and refinery maintenance; the coming weeks will be telling as we start to see the effects of the OPEC cuts as imports fall."
While OPEC may indeed be inspired to extend its cuts in the wake of so many countries pumping full-out, it is equally likely the reverse could happen: last week, Herman Wang, OPEC specialist at S&P Global Platts, said, "how long Saudi Arabia is willing to shoulder the burden of these cuts if it proves some of their cohorts are not fully complying with the deal remains to be seen."