Page 12 - NorthAmOil Week 40

NorthAmOil COMMENTARY NorthAmOil

Baghdad has been the worst offender among month-end level of 300,000 bpd.
OPEC+’s overproducers and rumours have Iran has also defied the odds, ramping up
been circulating that it is seeking to negotiate an production with domestic companies taking
exemption from the deal given the economy’s charge of major fields throughout the country
massive reliance on oil revenues. However, it has and exports continuing to flow, despite sanc-
so far faced growing pressure from Saudi Ara- tions. Key to this appears to have been the admis-
bia and other OPEC+ members to adhere to the sion by the Ministry of Petroleum (MoP) that it
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, up
bpd in September. from 6mn bpd in August despite flows to China
Baghdad is increasingly leaning on the IOCs dropping to 1.3mn bpd, their lowest level since
operating the country’s southern oilfields to June. It has been a remarkable year for Saudi oil
facilitate the reductions, though the techni- production, which hit an all-time single day high
cal services contacts (TSCs) for these assets of 12.1mn bpd on April 2, but fell to around 7mn
are already so heavily stacked in favour of the bpd during Q2 as the coronavirus (COVID-19)
government that cutting output from already pandemic took hold of market fundamentals.
reduced levels is likely to be unfeasible. This increased to 8.988mn bpd in August
Meanwhile, state-owned Basra Oil Co. and 8.974mn bpd in September, according to
(BOC) has been told to cut by 300,000 bpd. an industry official spoken to by Bloomberg this
week. The Kingdom’s reduced quota is set at a
Uptick little under 9mn bpd.
Already exempt from the output cuts, Vene- Some demand has returned since mid-year,
zuela raised production by 90,000 bpd, though but ahead of the next OPEC+ meeting in less
it is running at just 400,000 bpd, a shadow of the than two weeks, it appears that the recovery
3.45mn bpd it achieved in 1997, and down by could prove to have been insufficient for mem-
50% over the past 12 months. bers to stick to the current plan to begin ramping
Also not included in the reductions, Libya production back up at the turn of the year.
managed to bring about its first major output The market remains in a state of fragility,
uptick since late 2019 as its export terminals but for all Saudi Arabia’s stern tone with com-
came back on stream. Bloomberg estimated pliance laggards, it remains to be seen if any
that production grew by an average of 70,000- action can be taken to ensure improved align-
150,000 bpd during September, reaching a ment on output.™

P12 www. NEWSBASE .com Week 40 08•October•2020