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Opec-Plus’ November Cut Less Spectacular Than Intended

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Crude oil output by Opec-plus members participating in a production cut deal fell by 300,000 b/d in November to 38.13 million b/d, according to Energy Intelligence’s assessment, a significantly smaller decline than the market had anticipated.

A hefty increase by four countries — Angola, Kazakhstan, Russia and Nigeria — offset a potential 1 million b/d reduction that many observers had been expecting in line with the alliance’s agreement in October to slash output.

Since these four countries have been producing far less than their quota, their additional barrels fall within the deal’s parameters.

The smaller-than-expected Opec-plus cut has helped to keep global markets supplied and fed into the bearish sentiment sweeping oil futures, where leading benchmarks are in contango, a price structure generally that encourages oil storage since there is a glut of product.

Two months ago, the 19 countries in Opec-plus that produce on a quota basis decided to reduce output by 2 million b/d. However, the thinking at the time was that only half of this would consist of physical barrels, while the other half would simply lower targets for countries like Russia and Nigeria that have reached capacity limits.

Tellingly, Opec’s four stalwarts — Saudi Arabia, Iraq, United Arab Emirates and Kuwait — together reduced output by 920,000 b/d on the month, indicating the anticipated 1 million b/d cut was feasible.

However, the group’s two laggards — Nigeria and Angola — together raised production by 350,000 b/d compared with October, while Kazakhstan and Russia, both non-Opec countries, managed a joint 320,000 b/d increase.

All told, this 670,000 b/d gain greatly diminished the effect of the monthly cut by Mideast producers. It also alleviated any perception of tightness in global supplies at the start of winter.

Shortfall Curtailed

As predicted, the downward adjustment to targets had a significant impact on Opec-plus’ monthly production shortfall.

In the past six months, the alliance had come up short of its monthly target by an average 3.3 million b/d — the result of massive underproduction by countries that had run up against a capacity wall.

In November, however, the size of the shortfall fell to 2 million b/d, which still points to discrepancies in volume allocation among the participating countries.

Said differently, if Opec-plus were in theory to meet its official target, oil production would soar by 2 million b/d.

The largest shortfall belongs to Nigeria, whose November output was 730,000 b/d short of target, while in second place was Russia, which produced 670,000 b/d less than its quota. Third was Angola (250,000 b/d short), and fourth was Malaysia (190,000 b/d short).

December Outlook

Production could conceivably grow in December, when the November quotas will remain in place.

Assuming the big Mideast producers hold output steady, more barrels could emerge from Kazakhstan, which will want to compensate for three months of underproduction, and West Africa, where producers like Nigeria and Angola are generally unreliable but have been known to surprise to the upside.

Including the four members without a quota — Iran, Mexico, Libya and Venezuela — Opec-plus’ crude production last month fell by 220,000 b/d to 44.28 million b/d.

World Crude Oil and Other Liquids Supply
('000 b/d)Oct'22Nov'22Chg.Crude NovOther Nov
Non-Opec-Plus46,42246,074-34832,88713,187
US19,65819,496-16112,1007,396
Canada5,4055,485804,4301,055
Brazil3,8653,496-3682,965531
Colombia773781876318
Norway1,9512,020691,745275
UK892898581187
Egypt6676681553115
Qatar2,1352,149146131,536
China4,2274,23264,128105
India7597623578185
Indonesia7867915606185
Other Non-Opec-Plus5,3055,295-103,5961,699
Opec-Plus52,32352,279-4544,2768,003
Opec34,56534,270-29528,8305,440
Saudi Arabia13,20412,882-32210,4712,411
Iraq4,5604,432-1284,37260
Iran3,4113,469582,595874
UAE4,2384,097-1413,0471,050
Kuwait2,9812,846-1352,676170
Nigeria1,1331,193601,015178
Libya1,2801,270-101,21060
Algeria1,5101,490-201,029461
Angola9821,2472651,20542
Other Opec1,2661,344771,210134
Non-Opec17,75818,00825015,4462,562
Russia11,25511,289349,8121,477
Kazakhstan1,6741,9322581,678254
Azerbaijan6967069551155
Mexico†1,9381,958201,701257
Oman1,1131,068-45846222
Malaysia583556-27376180
Other Non-Opec499499048217
World Supply98,74598,353-39277,16321,190
Refinery Gains2,3442,47713300
Total World101,089100,830-26077,16323,666

Topics:
Crude Oil, Oil Supply, Opec-Plus Supply
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