OPEC+ Crude Oil Output Rises For First Time In Five Months

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  • OPEC and allies pump 42.58 mil b/d in July, up 490,000 b/d
  • Shortfall with production quotas increases to 2.80 million b/d
  • Middle East posts steady rises but African members struggle

According to the most recent Platts poll by S&P Global Commodity Insights, OPEC and its nine allies had their most extraordinary monthly crude oil production growth in July, driven by increases in Saudi Arabia and Kazakhstan.

OPEC+ alliance

Although it fell short of the 648,000 b/d promised when the group decided to accelerate their quota increases for July and August to assist meet rising demand, the OPEC+ alliance increased output by a sizable 490,000 b/d from June.

OPEC’s production increased by 250,000 b/d from June to 29.08 million b/d as nearly all of its Middle Eastern member’s experienced sustained growth. The production of OPEC’s nine allies, which increased by 240,000 b/d on average to 13.50 million b/d, was helped by a rebound in Kazakh and Russian output.

The entire OPEC+ alliance produced 42.58 million b/d, its highest level since March, the month following Russia’s invasion of Ukraine.

The difference between OPEC+ production and its limits increased to 2.80 million b/d, which is more than Kuwait, the alliance’s fifth-largest member, produced in July, as many countries struggled to simply sustain output.

S&P Global figures show that as a result, quota compliance spiked to a record high of 222.9% in the month.

The output of more than half of OPEC+ countries has been impacted by sanctions, geopolitical unrest, unanticipated outages, planned maintenance, and technological problems.

Gulf members lead

According to the poll, Saudi Arabia and the UAE, who collectively control almost all of the spare production capacity in the world, contributed a total of 280,000 b/d to the market in July.

Saudi Arabia increased production by 220,000 b/d, helped by a sharp increase in exports as well as a jump in the use of summer crude for power generation.

The OPEC supremo produced 10.77 million barrels per day, which was its greatest output in more than two years but fell just shy of its quota for July of 10.83 million barrels per day.

The UAE boosted production to 3.14 million b/d, an increase of 60,000 b/d every month, making it the third-largest oil producer in OPEC. Iraq and Kuwait, however, each added 70,000 and 50,000 barrels per day in July, respectively.

But altogether, the group’s African members significantly undershot their quotas last month, following a long-standing pattern. The two largest producers on the continent, Nigeria and Angola, fell 569,000 b/d and 332,000 b/d short of their goals in July, respectively, according to the survey.

Since last year, Nigeria has had to contend with a bombardment of technical, operational, and security concerns at its vital oil infrastructure, and Angolan production is also experiencing technical problems that are made worse by a lack of upstream investment and incentives.

Kazakhstan, Russia recover

The rebound of Russia’s output carried on, albeit more slowly. According to the poll, the nation under sanctions produced 9.80 million barrels per day in July as opposed to 9.75 million in June and 9.29 million in May.

The fact that its wellhead production has been limited by western sanctions has resulted in the July figure is more than 300,000 b/d below pre-invasion levels. According to poll panellists, crude exports decreased steadily in July, although Russian refining runs increased significantly due to strong local demand.

Kazakhstan, a fellow non-OPEC producer, saw its output recover to 1.39 million b/d, up 170,000 b/d from June. Kashagan, Kazakhstan’s second-largest oil field, was offline for the majority of the month due to extensive planned maintenance that started in May.

As planned maintenance would restrict output at Tengiz, the nation of Central Asia’s highest producing crude oil field, there may be additional disruptions this month. The North Caspian Operating Co. claims that a gas leak at a Kashagan processing facility was also detected in the beginning of August.

Libya, which is exempt from an OPEC+ quota because of internal unrest, maintained output at 650,000 b/d in July after managing to end its oil blockades and shutdowns by the middle of the month.

Following the lifting of a force majeure at its main oil terminals and fields, production is currently just above 1 million barrels per day. On July 14, a new management team took over the state-owned National Oil Corp. after the organization’s longtime chairman, Mustafa Sanalla, was fired and replaced by Farhat Bengdara, a former governor of the central bank.

Thin cushion

Amidst record-high inflation and the threat of a coming recession, the overall increase in OPEC+ production was a welcome supply boost for the world economy.

The alliance will increase quotas by another 648,000 b/d in August, but just as in July, it’s unclear how much of the increase will actually be able to be met.

In light of this, OPEC+ decided at its meeting on August 3 to increase September quotas only by 100,000 b/d compared to August, with officials noting worries about coronavirus outbreaks, other economic challenges, as well as an anticipated seasonal reduction of demand.

This “small” growth, according to Platts Analytics, highlights the paltry amount of excess capacity worldwide.

According to Paul Sheldon, chief geopolitical consultant at Platts Analytics, “OPEC+ quota hikes will cut spare capacity to 1 million b/d in September, of which less than 400,000 b/d is sustainable for more than a quarter.”

The OPEC+ ministers will next meet on September 5 to settle on output goals for October.

The survey data, which measures wellhead production, is created utilising data from traders, analysts, and oil industry authorities in addition to looking at exclusive shipping, satellite, and inventory data.

 

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Source: S&P Global 

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