August 9, 2022

WWW.ENERGYINTEL.COM

Opec-Plus: July Production Leaps, But Shortfall Still Enormous


  • Crude oil output by the 23-member alliance soared by over 1 million b/d in July to 44.5 million b/d thanks to gains by Saudi Arabia, Libya, Kazakhstan and Nigeria.
  • Production by the 19 members with a quota grew 770,000 b/d to 38.6 million b/d but remained 2.85 million b/d below the July target.
  • After rebounding in May-June, Russian production reached a plateau of around 9.8 million b/d, weighed down by Sakhalin woes
July was the month when Opec-plus corrected recent setbacks and cranked out the barrels. Kazakhstan, Libya and Nigeria — that all have struggled in recent months for various reasons — managed to reverse course and grow output, while Saudi Arabia, the alliance’s leader, also boosted activity at the wellhead.

As a result, the group's crude production last month grew by 1.06 million barrels per day compared to June and comprised 44.53 million b/d, according to Energy Intelligence’s assessment. This is the highest level since 46.4 million b/d posted in April 2020 — when Saudi Arabia opened the tabs in a short-lived price war with Russia.

The 19 members with a quota missed their target as expected, though this time by 2.85 million b/d, a slight improvement of the nearly 3 million b/d gap seen in May and June.

Created with Highcharts 9.0.0($/bbl)OPEC BASKET: PRICES STUNG BY SUMMER BLUESMay '21Jul '21Sep '21Nov '21Jan '22Mar '22May '22Jul '22$60$70$80$90$100$110$120NOTE: As of first day of month. Source: Opec

Stragglers’ Revival

Kazakhstan, Libya and Nigeria together boosted output last month by 620,000 b/d after having suffered steep declines in June. This is the crux of the July narrative.

Kazakhstan, which had shut the 425,000 b/d Kashagan field for maintenance in June, ramped up output last month by 209,000 b/d to 1.43 million b/d, which is still 250,000 b/d short of its target. A reported outage at the offshore field in early August is likely to prevent the country from meeting its quota this month.

Nigeria lifted 187,000 b/d more in July, reaching 1.17 million b/d, but the country’s erratic performance doesn’t bode well for future output volumes. The West African country came up 660,000 b/d short of its target, the equivalent of a staggering 2,200% compliance rate — by far the highest in the alliance. The monetary loss for the country is staggering: At a price of $110 per barrel, unrealized revenues from not meeting the July quota amounted to $2.25 billion.

Libya, which does not have a quota, pulled out an impressive rebound so that by late July output was around 1.2 million b/d, according to reports. Average output for the month was 850,000 b/d, up 224,000 b/d on June. Like Nigeria, however, Libya’s performance will remain erratic.

Opec leader Saudi Arabia increased production by 207,000 b/d to 10.83 million b/d, besting second-place Russia by over 1 million b/d even though both countries have the same baseline. Shipping data show that the Saudis had a busy export schedule for the month, while inventories barely moved.

Created with Highcharts 9.0.0OPEC-PLUS COMPLIANCE CREEPS UP TO RECORD TERRITORYOpecNon-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'22Jun'22Jul'22100%200%300%0%400%NOTE: Compliance rate based on updated monthly assessments; Opec rate does not include Libya, Iran, Venezuela; non-Opec does not include Mexico. Source: Energy Intelligence

Target Gap Remains Huge

In June, the 19 members of the alliance with a quota agreed to produce 41.45 million b/d in July. However, actual output came to 38.6 million b/d. Though 2.85 million b/d short of target, the result surpassed the previous two-year high set in March, after which Russian output plummeted.

Further, the monthly gain was 772,000 b/d, which compares to the 648,000 b/d monthly increase the alliance had approved in early June. This represents a rare feat for Opec-plus, which for months now has struggled to meet targets. The last time the alliance surpassed its monthly increase was in September 2021.

Signals from Russia and from Kazakhstan indicate that the alliance may not be able to repeat the July accomplishment this month, when collective Opec-plus can also boost production by 648,000 b/d. In September, the allotted increase will drop to 100,000 b/d.

Created with Highcharts 9.0.0('000 bbl)ALLIANCE OUTPUT SHORTFALL DROPS IN JULYSep'21Oct'21Nov'21Dec'21Jan'22Feb'22Mar'22Apr'22May'22Jun'22Jul'2205001,0001,5002,0002,5003,0003,500Source: Energy Intelligence

Peaking Russia?

Russia’s 9.82 million b/d produced last month was essentially flat compared to June. Vis-à-vis its production target, the country was 1 million b/d off.

The country is a mere 250,000 b/d short of its prewar, post-Covid peak of 10.06 million b/d posted in January. At the same time, the July level is about 380,000 b/d shy of its capacity of 10.2 million b/d as estimated by Energy Intelligence.

In other words, Russia’s target is currently well beyond its capacity, to the tune of 600,000 b/d, a discrepancy that will grow in August and beyond.

Remarkably, July crude output could have been higher — close to 9.9 million b/d — if not for the woes that have befallen the Exxon Mobil-led production-sharing agreement in Sakhalin-1. Output there fell to 2,200 b/d in the first few days of August, compared to over 73,000 b/d in June. Prior to Exxon’s decision to withdraw staff in March, production was 207,000 b/d.

Compliance With Opec-Plus Production Cuts
OpecBase ProductionJuly CeilingJuly ProductionOver/Under TargetCompliance With Cuts
Saudi Arabia11,50010,83310,830-3100%
Iraq4,8034,5804,359-221199
UAE3,5003,1273,1303NA
Kuwait2,9592,7682,7680100
Nigeria1,8291,7991,168-6312,203
Angola1,5281,5021,209-2931,227
Algeria1,0571,0391,04910NA
Congo (Br.)325320234-861,820
Gabon18718319613NA
Eq. Guinea127125111-14800
Opec 1027,81526,27625,054-1,222179
Iran3,296NA2,610NANA
Venezuela1,171NA730NANA
Libya1,114NA850NANA
Opec 1333,39626,27629,244-1,222179
Non-OpecBase ProductionJuly CeilingJuly ProductionOver/Under TargetCompliance With Cuts
Russia11,50010,8339,815-1,018253
Mexico*1,75301,7430NA
Kazakhstan1,7091,6801,430-250962
Oman883868865-3120
Azerbaijan718706562-1441,300
Malaysia595585383-2022,120
Bahrain2052022031NA
South Sudan13012814618NA
Brunei10210063-371,948
Sudan7574784NA
Non-Opec 915,91715,17613,545-1,631320
Combined 19*43,73241,45238,599-2,853225%
Opec-Plus 2351,066NA44,532NANA

Gary Peach, New York