LONDON (Reuters) - OPEC oil output in May has hit its highest since 2008 as Saudi Arabia kept rates high despite a drop in prices and Iranian shipments did not fall much further ahead of an EU embargo, a Reuters survey found on Tuesday.
The increase in supplies by Saudi Arabia has helped to cushion the impact of Western measures against Iran's nuclear programme. Still, with Iraq unable to sustain an increase in exports and Libyan output falling, analysts say further rises in OPEC supply will be harder to achieve.
"Given sustainability concerns around current levels of Libyan output and infrastructure constraints in Iraq, it is unlikely these two countries will be able to raise production much further in the next couple of months," said Harry Tchilinguirian of BNP Paribas.
In May, supply from the 12-member Organization of the Petroleum Exporting Countries has averaged 31.80 million barrels per day (bpd), up from 31.75 million bpd in April, the survey of sources at oil companies, OPEC officials and analysts found.
OPEC's total is the highest since September 2008, shortly before it agreed to a series of supply curbs to combat recession and collapsing demand, based on Reuters surveys. Supply is running almost 2 million bpd above OPEC's 30 million bpd target.
The group meets to review output policy on June 14 in Vienna and it remains to be seen if it can contain the political tensions caused by sanctions against Iran. Iran is unhappy about the high level of OPEC and Saudi production, delegates say.
"We agreed to produce around 30 million bpd at the last meeting. Producing more than that is against our own decision," said one delegate, who declined to be identified.
Oil prices surged in March to $128 a barrel, the highest since 2008, because of concern about disruption to global supply from the U.S. and European sanctions aimed at hurting Iran's crude export revenues.
With tension easing between Iran and the West, OPEC output climbing and concerns increasing about the euro zone debt crisis, prices have fallen back. Brent crude was trading just above $107 on Tuesday.
In May, the biggest increase in OPEC supply has come from Saudi Arabia, which has made clear it would like to see Brent at around $100 a barrel.
The kingdom has pumped an extra 100,000 bpd this month, the survey found, taking output to 10.10 million bpd, the highest in decades. There was no sign of its Gulf allies Kuwait and the United Arab Emirates throttling back supplies.
Extra supply is also coming from Nigeria, rising due to a new Total (TOTF.PA) field, Usan. Even so, a production cut by Royal Dutch Shell (RDSa.L) due to oil theft limited the increase.
OPEC output also rose because, for now at least, supply from Iran did not decline much further.
Iran's supply slipped by 20,000 bpd to 3.13 million bpd in May, according to the survey. That would be the lowest output in Iran since it produced 3.088 million bpd in 1990, according to figures from the U.S. Energy Information Administration.
In March and April, Iran's exports posted sizeable declines as some customers stopped or scaled back purchases ahead of the EU embargo starting on July 1. Core customers are continuing to buy, industry sources say.
IRAQ, LIBYA DROP
Iraq exported less crude from its southern ports after shipping a record amount in April, the survey found. An Iraqi oil official said production dropped because urgent maintenance was needed at one of the southern oilfields.
Shipments from southern Iraq have fallen to around 2.02 million bpd in May from to 2.11 million bpd in April, according to shipping data tracked by Reuters. Northern shipments were steady at around 350,000 bpd.
And output in Libya failed to increase for the first time in months, suggesting the oil industry's recovery from a virtual shutdown during the 2011 uprising against Muammar Gaddafi's rule has topped out.
Libyan supply slipped by 20,000 bpd to 1.42 million bpd. The eastern subsidiary of the National Oil Corporation (NOC) said it reduced production due to protests that closed off its headquarters. NOC itself denied in early May there was a production cut.
OPEC at a meeting in December set a target to produce 30 million bpd, settling an argument which broke out in 2011 after Iran and other members opposed a Saudi-led plan to raise OPEC's production ceiling.
Output has stayed above the target all year. Even so, delegates say OPEC is likely to leave the target unchanged at June's meeting. Analysts do not expect any increase given uncertainties such as Greece's possible exit from the euro.
"We are unlikely to see any formal announcement of further increases in actual production, but rather a wait-and-see attitude relative to how the markets evolve," Tchilinguirian said.
(Reporting by Alex Lawler; Editing by William Hardy)