Page 4 - MEOG Week 40

MEOG COMMENTARY MEOG

Ups and downs as OPEC+

levels broadly maintained

OPEC+ production levels were more or less maintained in
September as increases and decreases balanced each other out.

OPEC COMBINED oil production by OPEC+ mem- China, India and Japan all fell.
bers increased by 40,000 barrels per day (bpd)
in September as the UAE reduced its output by Continued non-compliance
WHAT: around 10%, balancing out increases from oth- On the flipside, despite having promised to
A major output reduction ers who have struggled to stay within imposed increase voluntary additional oil production cuts
by the UAE was offset by limits. to 400,000 bpd below its 3.8mn bpd ceiling in
increases by Iran, Iraq, The Emirates’ cuts brought its oil and con- August and September to make up for previous
Libya and Venezuela. densate output level to 2.43mn bpd – the lowest non-compliance with OPEC+ cuts, data sug-
for nearly two years, with crude down around gests that Iraq has yet to make much progress
WHY: 310,000 bpd and condensates dropping a further with this.
The Emirates have been 170,000 bpd. Baghdad has been the worst offender among
under pressure from The combined total represents a reduction of OPEC+’s overproducers and rumours have
OPEC+’s de-facto leader 480,000 bpd from October 2018, according to been circulating that it is seeking to negotiate an
Saudi Arabia to comply tracking data compiled by Bloomberg. exemption from the deal given the economy’s
with production cuts. The September reductions offset roughly massive reliance on oil revenues. However, it has
190,000 bpd of additional output from Iran, so far faced growing pressure from Saudi Ara-
WHAT NEXT: Libya and Venezuela, all of which are exempt bia and other OPEC+ members to adhere to the
Saudi ramped up its from the OPEC+ reduction agreement owing to promised cuts.
own exports amid higher their respective domestic struggles, and another Iraqi output has decreased in recent months,
demand from buyers in uptick in output from the group’s biggest compli- though not by anywhere near the total promised
India and South Korea. ance offender Iraq. reduction of 1.06mn bpd. According to the Min-
istry of Oil (MoO), production was 4.07mn bpd
UAE cutback in May, 3.7mn bpd in June, 3.69mn bpd in July
The UAE’s reductions suggest that it is edging and 3.69mn bpd in August.
closer to compliance with the cuts, following the Though official confirmation has not yet been
assertion by Minister of Energy Suhail Al-Maz- forthcoming, reports suggest that production for
rouei during the OPEC+ group’s September September actually increased by 90,000 bpd.
meeting that the output quota of 2.59mn bpd of Meanwhile, exports also grew, albeit margin-
crude would not be exceeded. It had overpro- ally from 2.597mn bpd in August to 2.613mn
duced in both July and August. bpd in September.
July’s oversupply came despite Abu Dhabi Baghdad is increasingly leaning on the IOCs
National Oil Co. (ADNOC) having shut down operating the country’s southern oilfields to
the onshore Bab oilfield in late June to carry out facilitate the reductions, though the techni-
maintenance. The field, which had been produc- cal services contacts (TSCs) for these assets
ing more than 370,000 bpd of light, sour Mur- are already so heavily stacked in favour of the
ban crude, has a capacity of 420,000 bpd, but had government that cutting output from already
remained offline until late July. reduced levels is likely to be unfeasible.
In June, the UAE had joined Saudi Arabia Meanwhile, state-owned Basra Oil Co.
and Kuwait in cutting extra production volumes, (BOC) has been told to cut by 300,000 bpd.
with OPEC’s three swing producers cutting by
100,000 bpd, 1mn bpd and 80,000 bpd, respec- Uptick
tively. Prior to the additional cuts, the emirates Already exempt from the output cuts, Vene-
committed to limit production to 2.44mn bpd zuela raised production by 90,000 bpd, though
from May until the end of July, giving an esti- it is running at just 400,000 bpd, a shadow of the
mated net average for the month of 2.34mn bpd. 3.45mn bpd it achieved in 1997, and down by
During September 1-15 production averaged 50% over the past 12 months.
2.9mn bpd, dropping by nearly 1mn bpd during Also not included in the reductions, Libya
September 16-30 when it averaged 1.95mn bpd. managed to bring about its first major output
As a result of these reductions, exports to uptick since late 2019 as its export terminals

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