Opec output surges to three-year high as Iran offsets Saudi drop-off

Oil output from the Organisation of the Petroleum Exporting Countries (Opec) surged to its highest in more than three years last month.

Against a backdrop of oil prices sliding back around $50 a barrel, the August market report from the Middle East-dominated oil-supply cartel showed almost a 101,000-a-day increase increase in output to 31.5m barrels per day (mb/d) in July, thanks to Iran's biggest contribution since 2012.

As a result, it said preliminary data indicated that global oil supply increased by 230,000 barrels per day in July to an average 94.9mb/d.

"Crude oil output increased mostly from Iraq, Angola, Saudi Arabia and Iran, while production in Libya showed the largest drop," the report said.

Opec crude oil production, not including Iraq, stood at 27.44 mb/d in July, up by 540,000 barrels per day over the previous month.

“Given the better-than-expected growth in global oil demand so far this year, together with some signs of a pick-up in the economies of the major consuming countries, crude oil demand in the coming months should continue to improve and, thus, gradually reduce the imbalance in oil supply-demand,” Opec said in the report.

The report noted that non-Opec oil supply was expected to grow by 0.96m barrels per day (mb/d) in 2015, following an upward revision due to higher-than-expected output from producers mainly outside of North America.

In 2016, non-OPEC oil supply is expected to increase by 0.27 mb/d, a slight downward adjustment from the previous report.

The recent fall in oil prices back to $50/bbl has been driven by worries about the impact of the apparent cooling of the Chinese economy, a stabilisation in the US rig count and indications that Saudi Arabia continues to pump aggressively.

But in the latest report, Saudi was said to have reduced its output in July by nearly 203,000 barrels a day to 10.36, its most significant reduction since August last year.

Some Opec members with economies reliant on higher crude prices have become increasingly desperate lately. A call from Algeria on Monday for an emergency meeting managed to lift oil prices, with WTI up by more than a dollar to just shy of $45.

However, two delegates told Reuters on Monday that the group has no plans for an emergency meeting before a next scheduled gathering in December.

Analyst Mark Henderson at Westhouse said he though the supposed global oil supply glut "could dissipate much quicker than market consensus believes" and suggested that the current low oil price provided "an excellent opportunity to buy quality E&P stocks".