June 9, 2022

WWW.ENERGYINTEL.COM

Opec-Plus: Non-Opec Gains Offset by Declines in Libya, Iraq

  • Crude oil output by the 23-member Opec-plus in May rose only 45,000 barrels per day to 43.37 million b/d, hamstrung by a steep fall in Libyan production.

  • Output by the 19 countries with a quota grew by 235,000 b/d to 37.68 million b/d, significantly less than the 432,000 b/d increase the alliance had agreed for the month. The bulk of the gain came from non-Opec members Kazakhstan and Russia.

  • The alliance’s yawning shortfall in supply reached 2.7 million b/d in May and is poised to grow in coming months despite a pledge earlier in June to raise monthly targets.

For Opec-plus, which accounts for 58% of crude oil output globally, life seems to proceed along the lines of “one step forward, one step back.”

In May, the monthly tapering for the alliance was raised by 32,000 b/d to 432,000 b/d — ostensibly a gesture of help alleviate the tight supply in world markets — but then Iraq, the alliance’s second-largest producer, ran into capacity constraints, while Gabon suffered a leak at its Cap Lopez export terminal.

Consequently, output by these two countries tanked by nearly 240,000 b/d compared to April, Energy Intelligence’s analysis shows.

Meanwhile, Libya, which does not have a quota, was racked by protests at its 300,000 b/d El-Sharara field, dragging down the country’s production by 260,000 b/d versus April to 690,000 b/d.

Add it all together, and Opec-plus’ production in May — including barrels from the other non-quota members Iran, Venezuela and Mexico — only managed to grow a mere 44,000 b/d on April, according to our assessment.

In other words, when the world is calling for oil, the alliance is unable to answer. This has buoyed the Opec basket price to new highs.

Created with Highcharts 9.0.0($/bbl)OPEC BASKET: SUPPLY WORRIES BUOY PRICESMar'21Apr'21May'21Jun'21Jul'21Aug'21Sep'21Oct'21Nov'21Dec'21Jan'22Feb'22Mar'22Apr'22May'22$60$70$80$90$100$110$120Source: Opec

Eurasian Rebound

Last month’s output increase of 235,000 b/d by the 19 members with quotas was nearly 200,000 b/d short of the targeted monthly increase. And yet it was a vast improvement compared to April, when production by this group plummeted by 646,000 b/d, throwing output back by months.

Kazakhstan, Saudi Arabia and Russia scored the biggest gains in May — collectively ratcheting up output by 380,000 b/d for the month, our assessment shows.

Kazakhstan, whose exports in April were crippled by technical issues at a key Black Sea terminal, ramped up production by nearly 175,000 b/d to 1.65 million b/d, slightly over target. Saudi Arabia, the alliance's leader, raised output by 115,000 b/d to 10.52 million b/d — or 30,000 b/d short of its target.

Russia, which underwent a precipitous fall in April, managed to stabilize and even grow wellhead activity in May. Production last month came in at 9.246 million b/d, according to our assessment, up 92,000 b/d on April.

In compliance terms, the alliance posted a 180% rate last month. This is less than 216% in April, but the high level confirms the theory that producer discipline is no longer a core issue but capacity is.

Created with Highcharts 9.0.0OPEC-PLUS COMPLIANCE: RETURN FROM STRATOSPHEREOpecNon-OpecOpec-PlusMay'20Jun'20Jul'20Aug'20Sep'20Oct'20Nov'20Dec'20Jan'21Feb'21Mar'21Apr'21May'21Jun'21Jul'21Aug'21Sep'21Oct'21Nov'21Dec'21Jan'22Feb'22Mar'22Apr'22May'220%100%200%300%400%*Compliance rate based on updated monthly assessments; Opec rate does not include Libya, Iran, Venezuela; non-Opec does not include Mexico. Source: Energy Intelligence

Unrealistic Targets

Output by the Opec-plus 19 in May was 2.7 million b/d short of the “required production” level of 40.37 million b/d agreed for the month.

Russia alone was 1.3 million b/d below its production target, accounting for nearly half of the alliance’s overall shortfall.

The deficit is forecast to grow in upcoming months despite the agreement last week to raise monthly quotas by 216,000 b/d to 648,000 b/d in July and August.

Granted, Libya and Gabon could mount a recovery in coming months, and Kuwait, Algeria, Kazakhstan and Oman still have a smattering of spare capacity. Nevertheless, we estimate that the overall alliance shortfall will grow to about 3 million b/d in June and perhaps as high as 3.5 million b/d in July.

Larger, unfulfilled quotas are the main reason for the forecast gap, while Russian production is expected to come under renewed pressure.

Created with Highcharts 9.0.0('000 bbl)ALLIANCE OUTPUT SHORTFALL CLIMBSSep'21Oct'21Nov'21Dec'21Jan'22Feb'22Mar'22Apr'22May'2205001,0001,5002,0002,5003,000Source: Energy Intelligence
Compliance With Opec-Plus Production Cuts
OpecBase ProductionMay CeilingMay ProductionOver/Under TargetCompliance With Cuts
Saudi Arabia11,50010,54910,519-30103%
Iraq4,8034,4614,305-156146%
UAE3,5003,0403,030-10102%
Kuwait2,9592,6942,6940100%
Nigeria1,8291,7531,178-575857%
Angola1,5281,4651,229-236475%
Algeria1,0571,0131,019686%
Congo (Br.)325312249-63576%
Gabon187179165-14NA
Eq. Guinea127122102-20506%
Opec 1027,81525,58824,490-1,098149%
Iran3,296NA2,550NANA
Venezuela1,171NA715NANA
Libya1,114NA690NANA
Opec 1333,39625,58828,445-1,098149%
Non-OpecBase ProductionMay CeilingMay ProductionOver/Under TargetCompliance With Cuts
Russia11,50010,5499,246-1,303237%
Mexico*1,7531,7531,734-19NA
Kazakhstan1,7091,6381,6491185%
Oman883846849392%
Azerbaijan718688578-110466%
Malaysia595571391-180850%
Bahrain205197168-29463%
South Sudan13012414218-211%
Brunei1029888-9316%
Sudan7572797NA
Non-Opec 915,91714,78313,190-1,593240%
Combined 19*43,73240,37137,680-2,691180%
Opec-Plus 2351,066NA43,369NANA

Gary Peach, New York