Page 5 - AfrOil Week 25

AfrOil COMMENTARY AfrOil

By contrast, Angola, Gabon and Nigeria all produced 288,000 bpd of oil in excess of its quota
moved more slowly, drawing the ire of Saudi in May, while Angola and Gabon went beyond
Energy Minister Prince Abdulaziz bin Salman, their limits by 90,000 bpd and 26,000 respec-
who has made compliance a pet issue. These tively. Platts also calculated that two other Afri-
three states, along with Brunei, did not reveal can OPEC members had overshot their quotas
their plans to the JMMC until the target date of by smaller amounts, with Equatorial Guinea
June 22. turning out an extra 8,000 bpd and the Republic
The committee also gave formal approval to of Congo (Brazzaville) an extra 1,000 bpd.
an agreement extending the May-June produc- The JMMC, using different numbers, indi-
tion cuts until the end of July in order to sup- cated last week that Nigeria would have to make
port the recovery of the oil market, which took up for missing its 417,000 bpd quota by 180,000
a bearish turn in the face of the coronavirus bpd in May. The committee has not yet revealed
(COVID-19) pandemic. The group will then the details of that country’s plan, but Bloomberg
start scaling the reductions back to 7.7mn bpd reported on June 23 that the West African state
between August and December, with the JMMC would be reducing output by an extra 45,000
continuing to meet monthly to adjust the quotas bpd between June and September.
as needed. It will then shrink the curbs further to
5.7mn bpd until April 2022. Next steps
Even so, delegates said after the meeting that The next JMMC meeting is set for July 15, with
the JMMC had made no decisions on the level a delegate-level technical meeting to be held the
of cuts in August, as the market outlook was still day before. “
uncertain. In the meantime, this committee’s latest deci- Nigeria will
Meanwhile, Saudi Arabia, the United Arab sions give added credibility to the OPEC+ sup-
Emirates (UAE), Kuwait and Oman have agreed ply deal. They could bring even more oil off the reportedly be
to implement an additional voluntary 1.2mn market, just as the recovery in demand, which
bpd cut for June as a show of good faith. These dropped precipitously because of the pandemic, reducing output
four states have said, though, that they do not begins to accelerate.
plan to extend those reductions into July. International oil prices have stabilised near by an extra
$40 a barrel, double their level in April. This 45,000 bpd
Compensation plan newfound stability emerged after OPEC+
The JMMC has called on the overproducing agreed to end a price war and make its big- between June
states to compensate for their lapses by cutting gest-ever output cuts. The rebound has been
output between July and September. further assisted by a rapid recovery in demand, and September
Iraq agreed to this arrangement after exceed- as Europe and the US join the initial China-led
ing its quota of 1.061mn bpd by nearly 600,000 comeback from lockdown.
bpd in May. It did not immediately reveal the Still, oil markets remain vulnerable, with a
details of its plan, but Bloomberg reported on huge surplus in fuel stockpiles and the threat of
June 23 that the Middle Eastern state was now a second wave of the virus weighing on prices.
due to bring production levels down by an At last week’s meeting, the JMMC agreed that
additional 573,000 bpd in the July-September global oil inventories might decline to a five-year
period, adding an extra 57,000 bpd cut in July average level later this year or in mid-2021, pro-
and a 258,000 bpd cut in August and September. vided member countries meet their obligations,
Iraq’s newly installed Oil Minister Ihsan Russian Energy Minister Alexander Novak said
Ismaeel had said on June 15 that crude exports in interview with the Rossiya 24 TV channel. ™
in June would be slashed by some 780,000 bpd,
a cut of nearly 25%, in an effort to comply with
the deal. Around the same time, though, an Iraqi
source told Platts that the country was likely to
maintain production at current levels in June
and July.
As of press time, Angola, Azerbaijan, Bru-
nei, Gabon and Kazakhstan had not revealed
any details of their plans for compensatory cuts.
Kazakh Energy Minister Nurlan Nogayev did
acknowledge on June 9 that his country had
failed to reduce output by 390,000 bpd as agreed
but had instead pumped an extra 3.13mn bar-
rels, or more than 240,000 bpd, between May 1
and May 12. He insisted, though, that his coun-
try remained committed to the terms of the deal.

Nigeria’s plan
Overall, nine of the 23 members of the OPEC+
group had compliance levels of below 90% in
May, according to a Platts survey conducted
earlier this month.
The survey also concluded that Nigeria had

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