OPEC+ crude oil output rises but quota shortfall hits record high: Platts survey

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A flag with the Organization of the Petroleum Exporting Countries (OPEC) logo is seen before a news conference at OPEC's headquarters in Vienna, Austria December 10, 2016. REUTERS/Heinz-Peter Bader

Libya’s recovery, along with growth by core Gulf members, drove OPEC+ crude production in August to its highest since April 2020’s price war, according to the latest Platts survey by S&P Global Commodity insights.

Even so, the group underachieved yet again in delivering its promised production increase for the month and remains far below its declared output ceiling, as sharp losses in Kazakhstan and Nigeria tempered August’s gains.

OPEC’s 13 members pumped 29.56 million b/d in August, up 480,000 b/d from July, the survey found. Russia and eight other non-OPEC allies fell by 220,000 b/d in the month, producing a collective 13.28 million b/d.

In all, OPEC+ production totaled 42.84 million b/d, an increase of 260,000 b/d from July. That is the most since the alliance opened the taps to produce 47.56 million b/d in April 2020 during a brief price war in a dispute over pandemic strategy before historic cuts were subsequently agreed.

Excluding exempt members Iran, Libya, and Venezuela, the 19 countries with quotas under the OPEC+ agreement fell 3.61 million b/d short of their targets—the widest gap in the alliance’s nearly five-year history.

Growing shortfalls have led to swirling questions about how much more crude the group will be able to add in a tight physical market facing ratcheting sanctions on Russia over the war in Ukraine.

Leaving aside Russia, which pumped 9.77 million b/d in August, the rest of the members have increased production by just 440,000 b/d since February, while quotas have risen by 2.96 million b/d, survey data shows.

Only Saudi Arabia and the UAE have any significant upside potential, according to many analysts, with the majority of OPEC+ producers already at maximum volumes or are hamstrung by technical problems, a lack of investment, or internal unrest.

Perhaps in recognition of their limits, OPEC+ ministers agreed at their latest meeting Sept. 5 to claw back quotas by 100,000 b/d for October.

But first, they have committed to a 648,000 b/d hike for September—the same aggressive increase they were supposed to deliver in August.

New Libyan management

OPEC kingpin Saudi Arabia boosted its output by 150,000 b/d in August to 10.92 million b/d—still below its quota of 11 million b/d, the survey found. That is the third highest level it has produced in a month.

The kingdom claims that it is capable of pumping 12.5 million b/d, if needed, although that is untested, and Platts Analytics estimates that sustainable capacity is closer to 11.5 million b/d.

In September, its quota rises to 11.03 million b/d.

Gulf neighbors the UAE and Kuwait both added 400,000 b/d each in the month, producing in line with their quotas.

War-torn Libya posted the biggest gains by far in the month, with state-owned National Oil Corp. quickly re-establishing production in several key fields under its new management.

Libyan production rose to 1.10 million b/d, up 450,000 b/d in the month, and its highest since February, according to the survey.

Libya’s government sacked long-serving NOC chairman Mustafa Sanalla July 14, replacing him in a politically motivated move with ex-central bank governor Farhat Bengdara, paving the way for force majeure at its major oil terminals and fields to be lifted.

Rival tribes and groups had blocked production and exports for months, seeking to gain control of NOC and its revenues.

Kazakh, Nigerian woes

Non-OPEC Kazakhstan suffered the biggest decline in the month, with output falling 150,000 b/d to 1.24 million b/d, according to the survey.

Cracks in loading facilities for Kazakh CPC Blend have hampered exports, while maintenance at the Tengiz field and a gas leak at facilities linked to the Kashagan field have shut in production.

Nigeria, now pipped by Angola as Africa’s largest producer, continued its precipitous decline with a 130,000 b/d drop in August, as key crude blend Forcados saw an almost complete shutdown.

Other major Nigerian grades Bonny Light and Brass River remain under force majeure, as the country has been plagued by a spate of pipeline closures, security incidents, and rampant oil theft.

Nigerian crude production has fallen 30% since January, Platts survey data shows.

The survey figures, which measure wellhead production, are compiled using information from oil industry officials, traders, and analysts, as well as reviewing proprietary shipping, satellite, and inventory data.

Source:Platts