Page 7 - FSUOGM Week 40

FSUOGM COMMENTARY FSUOGM

Iraq is yet to
make progress
in compensating
for previous
non-compliance.

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

Week 40 07•October•2020 www. NEWSBASE .com P7