October 7, 2022

WWW.ENERGYINTEL.COM

Opec-Plus: Alliance Reaches Post-Pandemic Output High

  • Crude oil production by all 23 members of Opec-plus amounted to 44.9 million b/d in September, a gain of 310,000 b/d on August.

  • Core Opec producers provided the bulk of monthly growth, though Kazakhstan pulled off a breakthrough as it restarted the massive offshore Kashagan field.

  • The shortfall between the monthly target and actual production in September was 3.4 million b/d, which should decline in coming months.

Output among the 19 alliance members with a monthly quota was 38.78 million b/d in September, according to Energy Intelligence’s assessment. This was the highest level since April 2020. The monthly gain of 310,000 b/d, the third-largest this year, was led by Saudi Arabia, Angola, and Kazakhstan, each of which boosted output by over 100,000 b/d.

While it is conceivable that production in October could grow despite the pledge to reduce barrels by 100,000 b/d, overall the fourth quarter is poised to see a significant decline compared to July-September now that the alliance has agreed to slash baseline quotas by 2 million b/d starting in November, which would effectively cut production by 1 million b/d. The alliance’s move had an immediate effect on oil prices, which jumped over 10% during the week, reversing the three-month downward trend.
Created with Highcharts 9.0.0($/bbl)OPEC BASKET* -- WILL Q4 REVERSE THE Q3 DECLINE?Mar'21Apr'21May'21Jun'21Jul'21Aug'21Sep'21Oct'21Nov'21Dec'21Jan'22Feb'22Mar'22Apr'22May'22Jun'22Jul'22Aug'22Sep'22Oct'22$60$80$100$120*As of first day of month. Source: Opec







Record Level

In September, Saudi Arabia’s production grew by 103,000 b/d to surpass the 11 million b/d threshold. The 11.05 million b/d represents the third-highest ever monthly output for the Saudis, whose record of 11.5 million was set in April 2020, according to Energy Intelligence’s assessments. The kingdom is believed to possess capacity of 12 million b/d, not including the Neutral Zone.

Angola, which has struggled since the pandemic to stabilize and meet production targets, managed to raise September output by 130,000 b/d to 1.24 million b/d, though this remains 300,000 b/d short of its required output level.

Kazakhstan was able to lift more barrels thanks to a restart, albeit slowly, of the offshore Kashagan field. The Central Asian producer was assessed at 1.36 million b/d in September, which is 350,000 below its target.

Overall Short

Russian crude production, which is two months away from an EU embargo on all seaborne deliveries, might have reached a plateau. Crude output last month came to 9.75 million b/d, our assessment shows, down 20,000 b/d on August. This was the first monthly decline since April. Interestingly, condensate production, which is not restricted under the Opec-plus deal, catapulted by 170,000 b/d over the month, or 20%, to 1.02 million b/d.

Still, Russian crude production was 1.28 million b/d short of its September target, accounting for 38% of the alliance’s overall shortfall of 3.4 million b/d for the month, just above the shortfall in August.

Nigeria came up 820,000 b/d short of target as the country continues to grapple with infrastructure woes and reports of rampant theft. Reuters reported this week that Nigerian officials found a pipe that had been siphoning crude from the Forcados terminal for nine years.

Created with Highcharts 9.0.0('000 bbl)OPEC-PLUS SHORTFALL EBBS IN SEPTEMBERSep'21Oct'21Nov'21Dec'21Jan'22Feb'22Mar'22Apr'22May'22Jun'22Jul'22Aug'22Sep'2201,0002,0003,0004,000Source: Energy Intelligence

Reducing the Discrepancy

In September, Opec-plus agreed to trim October output by 100,000 b/d, a symbolic cut that paves the way for the new reductions starting November. It was agreed to keep those in place for a year, through December 2023.

October output could surpass September’s, however. First, Kazakhstan is ramping up Kashagan, which could raise the country’s production by some 250,000 b/d, while Nigeria’s 250,000 b/d Forcados should renew exports in the second half of the month.

Russia remains a wild card. It can surprise to the upside as its producers try to ramp up sales ahead of an unofficial mid-November cutoff line for European offtakers. It can also boldly react to the G7 price cap scheme and limit exports.

Starting in November, however, the output cuts grow significantly, and based on the September output assessment, seven countries would have to make substantial reductions in output. Russia would still fall short of its new quota.

Energy Intelligence estimates that, based on September production, the 2 million b/d cut agreed earlier this week will remove 1.05 million b/d in real barrels from the market, while the remaining 950,000 b/d will remain on paper.

Thus fourth quarter crude oil output by the Opec-plus 19 is forecast to decline about 750,000 b/d to 37.8 million b/d compared to the third quarter, Energy Intelligence estimates.

September 2022 Opec-Plus Compliance
OpecBaseTargeted OutputPledged CutSeptember ProductionSeptember CutAugust ProductionMonthly Chg.
Saudi Arabia11,50011,03047011,047 453 10,944 103
Iraq4,8034,6631404,408 395 4,480 -72
UAE3,5003,1863143,192 308 3,184 8
Kuwait2,9592,8181412,818 141 2,811 7
Nigeria1,8291,83001,010 819 985 25
Angola1,5281,52901,235 293 1,103 132
Algeria1,0571,05701,056 1 1,063 -7
Congo (Br)3253250291 34 254 37
Gabon1871870193 -6196 -3
Eq Guinea127127095 32 65 30
Opec 1027,81526,7521,06525,345 2,470 25,085 260
Iran3,296002,570 NA2,620 -50
Venezuela1,17100675 NA690 -15
Libya1,114001,161 NA1,208 -47
Opec 1333,39626,7521,06529,751 2,47029,603148
Non-OpecBaseTargeted OutputPledged Cut September Production September CutAugust ProductionMonthly Chg.
Russia11,50011,0304709,750 1,750 9,770 -20
Kazakhstan1,7091,71001,357 352 1,243 114
Oman8838830888 -5893 -5
Azerbaijan7187180566 152 554 12
Malaysia5955950363 232 395 -32
Bahrain2052050210 -5210 0
South Sudan1301300153 -23167 -14
Brunei102102074 28 77 -3
Sudan7575075 0 78 -3
Non-Opec 915,91715,44847013,436 2,481 13,38749
Mexico1,7531,75301,711 NA1,691 20
Non-Opec 1017,67017,20147015,147 --15,07869
19 Under Quota43,73242,2001,53538,781 4,95138,472309
Opec 2351,06643,953--44,898 --44,681 217

Gary Peach, New York