OPEC crude production has been climbing steadily alongside rising oil prices and the latest Platts survey shows a 230,000 b/d jump to 29.8 million b/d in February. This despite a 190,000 b/d average drop in Libyan production over the month.
The past few months have seen increases here and there across the membership but, as the numbers show, it all comes down to Saudi Arabia, the only country in the world with any significant volume of surplus crude output capacity.
Estimates of Saudi production last month vary. The Platts estimate is 8.7 million b/d, that of the International Energy Agency 8.9 million b/d. But all the various estimates show that the OPEC kingpin has been pumping up the volume.
The Platts estimates, based on a survey of OPEC and oil industry officials and analysts, show Saudi crude output rising by 480,000 b/d between November and February.
And Saudi output has climbed further, the kingdom's oil minister, Ali Naimi, indicating last week that production had risen to 9 million b/d.
There is little appetite within OPEC at the moment for an emergency meeting that might seek to increase the official 24.845 million b/d target for the 11 members bound by quotas, even if that number looks ludicrous when compared with actual production, estimated by Platts at 27.1 million b/d in February.
Some members argue that there is no actual shortage of crude at the moment, and one senior OPEC delegate on March 14 voiced some concern that just to call an emergency meeting could contribute to speculative activity.
But again, it all comes back to the fact that Saudi Arabia, with 3.5 million b/d of spare capacity, is the only country with the wherewithal to give its production a mighty boost, and Riyadh hasn't bothered to wait for an OPEC meeting to take action.
According to oil minister Naimi, it is building up storage at various locations, including Rotterdam and Sidi Kerir on Egypt's Mediterranean coast. It has also mixed its own crude streams to achieve two "special" blends closer in quality to the lost Libyan supplies.
So far so good. The increase in Saudi production last month more than offset the drop in Libyan volumes. But Libyan production and exports will be negligible in March and, assuming the demand will be there, Saudi Arabia and others will be called upon to replace more than 1 million b/d of lost Libyan crude. Which means a further drop in Saudi surplus capacity.
The IEA's latest monthly oil market report, released on March 15, puts spare capacity within OPEC at just above 4 million b/d, the lowest level since late 2008, with Saudi Arabia holding 80% of this volume.
The agency defines effective spare capacity as oil that can be produced within 30 days and sustained at that level for 90 days. It excludes some nominal spare capacity in Iraq, Nigeria and Venezuela--and now Libya--which it considers to be uncertain for technical or political reasons.
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