Boost in Non-OPEC Oil Output Is Offsetting Cartel’s Cuts, Analysts Say

Non-OPEC oil production has steadily risen over the past year despite pleas from the Organization of Petroleum Exporting Countries to exercise restraint, oil industry analysts say.

“For the most part, major non-OPEC producers are just giving lip service to cooperating with OPEC. The overall increase in non-OPEC output has offset the declines in OPEC output, and I think this situation will continue,” said Dennis Winters, petroleum economist with Data Resources Inc.

According to Energy Department statistics, total non-OPEC output in 1986 averaged 37.238 million barrels a day. For the first nine months of 1987, non-OPEC output averaged 37.414 million barrels a day. For September, 1987, the last month figures were available, non-OPEC production was 37.663 million barrels a day.

OPEC representatives have consistently said that the cooperation of non-OPEC producers is essential to stabilize world oil prices.

Dillard Spriggs, economist with Petroleum Analysis Ltd., said non-OPEC output is up about 500,000 to 600,000 barrels a day this year over last year, and the increase could fill any void left by OPEC cutbacks.

“Non-OPEC supplies have been going up over the last several years, and this is keeping the stick to OPEC,” Spriggs said.

Analysts said the non-OPEC response to OPEC’s request for cooperation has been spotty at best.

OPEC output was estimated to be down in January to 16.7 million barrels a day, including Iraq. That compares to a self-imposed ceiling of 15.06 million barrels a day, excluding Iraq. OPEC President Rilwanu Lukman said Iraq’s output in January was around 2.15 million barrels a day.

“Non-OPEC production has increased significantly, probably enough to make up all OPEC cutbacks and to decrease OPEC’s market share,” said Dennis Eklof of Cambridge Energy Resources. “Non-OPEC output has been a continuing thorn in the side of OPEC, and it probably won’t get any better for the next couple of years.”

Analysts said the only non-OPEC country that has a definite plan of cutback cooperation in place is Norway, which has decreased its output rate by 7.5%.

“But even Norway’s cooperation came at a time when new producing fields were coming on line. Norway’s total overall production is still up, although at a slower rate than it would have been,” Spriggs said.

Energy Department statistics show that major producers--including the Soviet Union, Britain, Mexico, China, Norway, as well as Brazil, Colombia, Syria, India, Malaysia, Oman and Angola--all increased output in 1986 over 1985. Only the United States, Egypt and Australia experienced slight cutbacks over the same period.

All the countries had production increases--mostly significant increases--in 1986 relative to 1980.

North Yemen is a new producer whose output is averaging 150,000 to 200,000 barrels a day, and could hit 300,000 barrels a day by the end of the year, analysts said.

“This is new-found wealth for North Yemen, and they don’t care all that much about the price. This is a substantial new find. By the 1990s, both North and South Yemen together could be producing 1 million barrels per day and most of this would be exports,” Winters said.

Analysts said that aside from the effort to stabilize the price of oil, the added problem for OPEC from increasing non-OPEC output is a loss of market share.

“OPEC has experienced a dramatic decrease in market share over the past decade, but it suits OPEC to not call attention to this,” said Sanford Margoshes, oil analyst with Shearson Lehman Hutton Inc.

OPEC’s market share problem is compounded by an expected slow growth in demand for oil. Cambridge Energy Resources recently predicted that worldwide demand will grow only about 1% each year for the next three to five years.

“Therein lies the rub for OPEC,” Eklof said. “If growth in demand is slow and only picks up about 300,000 to 500,000 barrels per day, it doesn’t leave much room for OPEC oil.”