The U.S. Energy Information Administration expects OPEC countries to continue producing above their quotas, pushing the cartel's average output 770,000 barrels per day (bpd) above official levels for the quarter.
OPEC's actual production would also be just 619,000 bpd lower during the first quarter from output levels at the end of last year, the agency said in its monthly OPEC update. That would be much less than the 1.5 million bpd that OPEC members (excluding Iraq) agreed to cut from their production quotas during a meeting last month in Vienna.
The cartel set its production at 25.2 million bpd beginning Feb. 1 in order to stop oil prices from falling from what is expect to be lower oil demand in the first half of this year. The EIA said OPEC's production cuts should be sufficient, unless there is a world economic slowdown that dampens oil demand.
"Not further cuts would be needed to maintain prices within OPEC's ($22-$28) target range," the agency said. Separately, the agency lowered its assessment of Iraqi oil production for the year. The EIA said it assumes Iraq will try to further erode United Nations sanctions by disrupting its own oil supplies.
The EIA said it continues to believe that Iraq will not be able to meet its goal of producing 3.4 million bpd of oil this year, which was the country's output level in July 1990 just prior to the Gulf War. Because of problems with Iraq, the EIA lowered its projected overall OPEC production levels by 300,000 bpd for
this year.
Even with the downward revision in
OPEC output, the agency said worldwide production capacity is currently at its lowest level during a non-disruption period, such as the Gulf War, in the past three decades. Surplus production capacity will be as low as 3.3 million bpd for OPEC and 3.8 million bpd worldwide during the current quarter, according to the agency.