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Baghdad has been the worst offender among Iran has also defied the odds, ramping up
OPEC+’s overproducers and rumours have been production with domestic companies taking
circulating that it is seeking to negotiate an exemp- charge of major fields throughout the country
tion from the deal given the economy’s massive reli- and exports continuing to flow, despite sanc-
ance on oil revenues. However, it has so far faced tions. Key to this appears to have been the admis-
growing pressure from Saudi Arabia and other sion by the Ministry of Petroleum (MoP) that it
OPEC+ members to adhere to the promised cuts. had sought to obfuscate the origin of cargoes,
Iraqi output has decreased in recent months, with Oil Minister Bijan Zanganeh noting that
though not by anywhere near the total promised “whatever [Iran] export[s] is not under Iran’s
reduction of 1.06mn bpd. According to the Min- name” and supporting “any proposal for selling
istry of Oil (MoO), production was 4.07mn bpd Iranian crude”.
in May, 3.7mn bpd in June, 3.69mn bpd in July Meanwhile, OPEC+ kingpin Saudi Arabia
and 3.69mn bpd in August. cut its official selling prices (OSPs) to Asia and
Though official confirmation has not yet been increased its crude exports by 100,000 bpd as
forthcoming, reports suggest that production for sales to India and South Korea made up for weak
September actually increased by 90,000 bpd. Chinese demand.
Meanwhile, exports also grew, albeit margin- Bloomberg reported this week that exports
ally from 2.597mn bpd in August to 2.613mn had flowed at 6.1mn bpd during September,
bpd in September. up from 6mn bpd in August despite flows to
Baghdad is increasingly leaning on the IOCs China dropping to 1.3mn bpd, their lowest
operating the country’s southern oilfields to level since June. It has been a remarkable year
facilitate the reductions, though the techni- for Saudi oil production, which hit an all-time
cal services contacts (TSCs) for these assets single day high of 12.1mn bpd on April 2, but
are already so heavily stacked in favour of the fell to around 7mn bpd during Q2 as the coro-
government that cutting output from already navirus (COVID-19) pandemic took hold of
reduced levels is likely to be unfeasible. market fundamentals.
Meanwhile, state-owned Basra Oil Co. This increased to 8.988mn bpd in August
(BOC) has been told to cut by 300,000 bpd. and 8.974mn bpd in September, according to
an industry official spoken to by Bloomberg this
Uptick week. The Kingdom’s reduced quota is set at a
Already exempt from the output cuts, Vene- little under 9mn bpd.
zuela raised production by 90,000 bpd, though Some demand has returned since mid-year,
it is running at just 400,000 bpd, a shadow of the but ahead of the next OPEC+ meeting in less
3.45mn bpd it achieved in 1997, and down by than two weeks, it appears that the recovery
50% over the past 12 months. could prove to have been insufficient for mem-
Also not included in the reductions, Libya bers to stick to the current plan to begin ramping
managed to bring about its first major output production back up at the turn of the year.
uptick since late 2019 as its export terminals The market remains in a state of fragility,
came back on stream. Bloomberg estimated but for all Saudi Arabia’s stern tone with com-
that production grew by an average of 70,000- pliance laggards, it remains to be seen if any
150,000 bpd during September, reaching a action can be taken to ensure improved align-
month-end level of 300,000 bpd. ment on output.™

P8 www. NEWSBASE .com Week 40 08•October•2020