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OPEC members boost July output, agree small uptick
POLICY
MIDDLE Eastern OPEC members increased oil production in July, backing up the group’s promise to help ease oil market constraints. Meanwhile, the OPEC+ group agreed to another small rise in September targets during its meet- ing this week.
According to a Bloomberg survey of Rystad Energy, Kpler and Rapidan Energy and others, OPEC added 270,000 barrels per day (bpd) of oil output in July, with Saudi Arabia accounting for around 180,000 bpd of the increase. This took its daily output for the month to 10.78mn bpd, the highest level since it briefly achieved a single-day record of 12.2mn bpd in April 2020 and 53,000 bpd beneath its quota.
News of the latest uptick follows US President Joe Biden saying that he anticipated that Riyadh would take “further steps” to ease pressure on supply/demand dynamics.
Other OPEC members the UAE and Kuwait also expanded output, with the former hitting 3.24mn bpd, outproducing its quota by 113,000 bpd. Abu Dhabi has long argued that its baseline for OPEC+ agreements should be significantly higher than its 3.168mn bpd level and state- owned Abu Dhabi National Oil Co. (ADNOC) continues to work on various projects that will raise its production capacity from the current 4.2mn bpd to 5mn bpd by 2027.
Efforts by the top producers countered reduc- tions elsewhere, with Angola, Iran and Nigeria all seeing their output fall during July.
However, as Saudi and the UAE in particu- lar have consistently argued, there is little more they can – or will – do to ease supply shortfalls,
and OPEC+ signed off an increase of just 100,000 bpd for September despite Biden and other Western leaders’ best efforts to influence a greater hike.
The largest quota expansion will be for Russia and Saudi, whose politically influenced quotas will maintain parity, climbing by 26,000 bpd for the month to 11.03mn bpd, a level neither are likely to produce at for a sustained period.
In the case of Russia, this is largely because of the impact of sanctions on markets for its crude, while Riyadh is keen to hold back as much of its remaining ‘spare capacity’ as possible. Majority state-owned Saudi Aramco claims a maximum sustainable capacity (MSC) of 12mn bpd, which rises to around 12.2mn bpd with the inclusion of Saudi’s share of the Partitioned Neutral Zone (PNZ) that it shares with Kuwait. Iraq’s quota will rise by 12,000 bpd to 4.663mn bpd.
Speaking to Reuters, Raad Alkadiri, manag- ing director for energy, climate and sustainability at Eurasia Group, said that the increase “is so lit- tle as to be meaningless. From a physical stand- point it is a marginal blip. As a political gesture [to Biden] it is almost insulting.”
Meanwhile, Dr. Yousef Alshammari, CEO & head of oil research at CMarkits, said via social media that the move provides “a partial offset to shortfalls in production targets by many produc- ing members while maintaining spare capacity at around 2.1mn bpd held mainly with Saudi Ara- bia and UAE.” He added: “While this move was expected a while ago, prices may take a partial effect due to the pre-existing impact of inflation and fears of recession.”™
News of the latest uptick follows US President Joe Biden saying that he anticipated that Riyadh would take “further steps” to ease pressure on supply/demand dynamics.
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05•August•2022