Page 8 - LatAmOil Week 40

LatAmOil COMMENTARY LatAmOil

As a result of these reductions, exports to China, managed to bring about its first major output
India and Japan all fell. uptick since late 2019 as its export terminals
came back on stream. Bloomberg estimated
Continued non-compliance that production grew by an average of 70,000-
On the flipside, despite having promised to 150,000 bpd during September, reaching a
increase voluntary additional oil production month-end level of 300,000 bpd.
cuts to 400,000 bpd below its 3.8mn bpd ceiling Iran has also defied the odds, ramping up
in August and September to make up for pre- production with domestic companies taking
vious non-compliance with OPEC+ cuts, data charge of major fields throughout the country
suggests that Iraq has yet to make much progress and exports continuing to flow, despite sanc-
with this. tions. Key to this appears to have been the
Baghdad has been the worst offender among admission by the Ministry of Petroleum (MoP) “
OPEC+’s overproducers and rumours have that it had sought to obfuscate the origin of car- Some demand
been circulating that it is seeking to negotiate goes, with Oil Minister Bijan Zanganeh noting has returned,
an exemption from the deal given the econo- that “whatever [Iran] export[s] is not under
my’s massive reliance on oil revenues. However, Iran’s name” and supporting “any proposal for but it appears
it has so far faced growing pressure from Saudi selling Iranian crude”.
Arabia and other OPEC+ members to adhere to Meanwhile, OPEC+ kingpin Saudi Arabia the recovery
the promised cuts. cut its official selling prices (OSPs) to Asia and
Iraqi output has decreased in recent months, increased its crude exports by 100,000 bpd as could prove to be
though not by anywhere near the total promised sales to India and South Korea made up for weak insufficient for
reduction of 1.06mn bpd. According to the Min- Chinese demand.
istry of Oil (MoO), production was 4.07mn bpd Bloomberg reported this week that exports OPEC+ members
in May, 3.7mn bpd in June, 3.69mn bpd in July had flowed at 6.1mn bpd during September, up
and 3.69mn bpd in August. from 6mn bpd in August despite flows to China to stick to the
Though official confirmation has not yet dropping to 1.3mn bpd, their lowest level since current plan to
been forthcoming, reports suggest that produc- June.
tion for September actually increased by 90,000 It has been a remarkable year for Saudi oil ramp production
bpd. Meanwhile, exports also grew, albeit mar- production, which hit an all-time single day high
ginally from 2.597mn bpd in August to 2.613mn of 12.1mn bpd on April 2, but fell to around 7mn back up
bpd in September. bpd during Q2 as the coronavirus (COVID-19)
Baghdad is increasingly leaning on the IOCs pandemic took hold of market fundamentals.
operating the country’s southern oilfields to This increased to 8.988mn bpd in August
facilitate the reductions, though the techni- and 8.974mn bpd in September, according to
cal services contacts (TSCs) for these assets an industry official spoken to by Bloomberg this
are already so heavily stacked in favour of the week. The Kingdom’s reduced quota is set at a
government that cutting output from already little under 9mn bpd.
reduced levels is likely to be unfeasible. Some demand has returned since mid-year,
Meanwhile, state-owned Basra Oil Co. but ahead of the next OPEC+ meeting in less
(BOC) has been told to cut by 300,000 bpd. than two weeks, it appears that the recovery
could prove to have been insufficient for mem-
Uptick bers to stick to the current plan to begin ramping
Already exempt from the output cuts, Vene- production back up at the turn of the year.
zuela raised production by 90,000 bpd, though The market remains in a state of fragility, but
it is running at just 400,000 bpd, a shadow of the for all Saudi Arabia’s stern tone with compliance
3.45mn bpd it achieved in 1997, and down by laggards, it remains to be seen if any action can
50% over the past 12 months. be taken to ensure improved alignment on out-
Also not included in the reductions, Libya put. ™

(File photo)
(File photo)

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