OPEC July output hits 2017 high

OPEC July output hits 2017 high
Not including Libya and Nigeria, compliance among OPEC's 12 members with quotas under the production cut agreement remains robust at 114%, down slightly from 116% in June.
Published: 9 August 2017 - 3:58 a.m.
By: Indrajit Sen

Libya's continued dramatic recovery from civil strife pushed OPEC's July output to yet another 2017 high, with the bloc producing 32.82mn barrels per day (bpd), according to the latest S&P Global Platts OPEC survey.

Libya, exempted from OPEC production cuts that began January 1, averaged 990,000 bpd in July, up 180,000 bpd from June. Fellow exempt member Nigeria averaged 1.81mn bpd, a 30,000 bpd increase on the month, according to the survey.

The two exempt countries, along with increased output from Saudi Arabia as the peak summer air conditioning season is now in full swing, have sent OPEC's collective output about 920,000 bpd above its nominal ceiling of around 31.9mn bpd, when new member Equatorial Guinea is added in and suspended member Indonesia is subtracted.

Saudi Arabia produced 10.05mn bpd in July, according to the survey.

Not including Libya and Nigeria, compliance among OPEC's 12 members with quotas under the production cut agreement remains robust at 114%, down slightly from 116% in June, based on an average of January through July output.

That illustrates the challenge OPEC faces in rebalancing the market through its output deal, which also involves 10 non-OPEC producers, as the two exempt countries' recoveries, tenuous though they may be, threaten to undo a large portion of the group's collective cuts.

The combined output of Libya and Nigeria in July was 590,000 bpd above October levels, the month on which OPEC based its production cuts and quotas. Most of Libya's key oilfields have now been brought back online, contributing to output growth in recent months, though some technical issues persist.

In late August, Libya's two main rival centres of power tentatively agreed a ceasefire, raising hopes that production could reach state-owned National Oil Company's 1.25mn bpd target by the end of 2017. Nigerian output has continued its upward trend despite the ongoing force majeure on exports of key crude grade Bonny Light due to pipeline issues.

(article continues on next page…)

Output of another key Nigerian crude, Forcados, continued to ramp up last month, and tanker tracking data also showed a steady rise in exports month-on-month. Sabotage attacks on the key pipelines in Niger Delta in July, however, showed that the Nigeria's forward prospects continue to be riddled with uncertainty because of political tensions.

OPEC officials have, at least publicly, dismissed the notion that Libya and Nigeria are undercutting their efforts, saying they are happy for the two countries.

Saudi energy minister Khalid al-Falih in St Petersburg last month said there was room in the market to absorb 800,000-1mn bpd of growth from the OPEC/non-OPEC bloc, including Libya and Nigeria. He pointed out that demand growth forecasts for 2018 range between 1.4mn and 1.6mn bpd, while the US Energy Information Administration has projected US production to increase 600,000 bpd.

While collective compliance with the cut agreement is strong, results among individual countries are still uneven.

OPEC's second largest member Iraq grew production slightly to 4.48mn bpd in July, remaining the least compliant country in terms of output above its quota, which is 4.35mn bpd. Iran, OPEC's third largest producer, also had a slight increase in output to 3.82mn bpd, just above its quota of 3.80mn bpd under the deal, as its barrels in floating storage rose, according to the survey.

UAE oil production likewise rose in July to 2.89mn bpd, above its quota of 2.87mn bpd. Ecuador, which could no longer afford to continue with production cuts, its oil minister said on state television last month, saw a slight rise in output in the month to 530,000 bpd, also above its quota of 520,000 bpd.

The OPEC/non-OPEC monitoring committee, composed of ministers from Kuwait, Russia, Algeria, Venezuela and Oman, which met in St Petersburg on July 25, has said it plans to enforce compliance much more tightly going forward.

Of the 12 OPEC members with quotas under the deal, eight of them are fully or overly compliant with their allocations, based on an average of January-July output, led by Saudi Arabia, whose seven-month average is 92,000 bpd below quota.

The deal calls on OPEC and its 10 non-OPEC partners to cut a combined 1.8 million bpd from October levels. It was recently extended through March 2018. The Platts estimates were obtained by surveying OPEC and oil industry officials, traders and analysts, as well as reviewing proprietary shipping data.




Click here to add your comment

Please add your comment below
Name
Country
Email
Your email address will not be published
Captcha