November 8, 2022

WWW.ENERGYINTEL.COM

Opec-Plus: October Output Flat Ahead of Massive Cut

  • Crude oil production by the 19 members of Opec-plus with a monthly quota fell 63,000 b/d in October to 38.57 million b/d.
  • October output was 3.5 million b/d short of the alliance's target, roughly the same level as August-September.
  • Russia’s and Nigeria’s aggregate shortfall for the month surpassed 2.1 million b/d, accounting for 60% of the group’s underperformance.

For Opec-plus, October 2022 will go down in history as a quiet interim before the massive, market-altering production cut of November-December — and most likely beyond — that will correct some of the statistical imbalances on output targets and compliance rates.

According to Energy Intelligence’s assessment, production for the month fell by 63,000 barrels per day, compared to the 100,000 b/d that the alliance had agreed in September — at the time a gentle nod to demand erosion fears.

Still, the 38.57 million b/d produced was 3.53 million b/d short of the required target for the month. But after the next, very ambitious cut, which will lower the production target by 2 million b/d and effectively remove 1 million b/d of physical barrels, the massive shortfall seen in recent months should decline to around 2.5 million b/d, our forecast shows.

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

Differing Momentum

The two “halves” of the alliance — Opec and non-Opec — moved in different directions in October.

Among the 10 members with a target, Opec output dropped sharply by 180,000 b/d compared to September to 25.1 million b/d, while the nine non-Opec producers eked out a gain of 115,000 b/d to 13.51 million b/d. Most of the uptick came from Kazakhstan, which is restarting the giant offshore Kashagan field.

Saudi Arabia’s output retreated nearly 60,000 b/d, which compares to the 26,000 b/d it pledged to cut for the month. Total production came to 10.99 million b/d, according to our estimate, or 15,000 b/d short of target.

The United Arab Emirates, by contrast, overshot its ceiling by 10,000 b/d and cranked out 3.19 million b/d, giving it a compliance rate of 97%. Reports indicate the UAE was against the idea of a significant cut in November-December, and whether it chooses to comply in coming months, particularly considering the cuts are mandatory, will be closely watched.

Iraq, meanwhile, managed to boost output by 90,000 b/d. Basrah exports reached a three-year high of 3.3 million b/d as Opec’s second-largest producer pushes its infrastructure capacity to the hilt.

Created with Highcharts 9.0.0($/bbl)OPEC BASKET: FOURTH QUARTER STARTS UPSWINGMay '21Jul '21Sep '21Nov '21Jan '22Mar '22May '22Jul '22Sep '22Nov '22$60$70$80$90$100$110$120$130*As of first day of month. Source: Opec

Outstanding Laggards

October output by Russia, the alliance’s second-largest producer, was 9.72 million b/d, or a mere 30,000 b/d down from September. Compared to the target of 11 million b/d, output was fantastically short by 1.29 million b/d.

Russia’s production has essentially been flat over the past five months — moving in a ban of about 100,000 b/d — but next month it will encounter the EU embargo and the G7-mandated price cap.

Worth noting is that Rosneft has managed to restart production at Sakhalin-1, which Exxon Mobil abandoned earlier this year. This should buoy Russia’s numbers somewhat in November-December while oil companies look to ramp up refining runs and export more products.

For its part, Nigeria remains in the doldrums. Crude output last month was a paltry 947,000 b/d, down 15,000 b/d month on month, and the country's shortfall was 880,000 b/d.

October was the fifth month straight that Nigeria’s crude production was under 1 million b/d as theft and technical mishaps cripple the industry. Although the country keeps an optimistic face on upstream prospects, serious doubts remain that it can turn fortunes around.

Finally, the alliance’s third-largest laggard, Angola, saw its output decline by 140,000 b/d to 1.03 million b/d. The country was almost 500,000 b/d short of required production per the deal.

Wider Alliance

Altogether, the 23 members of the alliance produced 44.62 million b/d in October, our assessment indicates, which amounts to a decline of 110,000 b/d on the month. Among the four members without a quota, only Libya managed to raise production, or by 44,000 b/d to 1.21 million b/d, which is widely believed to be capacity.

Iran saw a decline in exports as it now competes with Russian barrels in Asia, while Venezuelan production slid further and risks falling beneath 600,000 b/d. Mexican output continues to stagnate in the 1.69 million b/d range.

October 2022 Opec-Plus Compliance
OpecBaseTargeted OutputPledged CutOct ProductionSep ProductionOct CutMonthly Chg.
Saudi Arabia11,50011,00449610,989 11,047 511 -58
Iraq4,8034,6511524,498 4,408 305 90
UAE3,5003,1793213,188 3,192 312 -4
Kuwait2,9592,8111482,811 2,818 148 -7
Nigeria1,8291,8263947 962 882 -15
Angola1,5281,52531,032 1,170 496 -138
Algeria1,0571,05521,058 1,056 -1 2
Congo (Br.)3253250222 291 103 -69
Gabon1871861227 193 -40 34
Eq. Guinea127127085 98 42 -13
Opec 1027,81526,6891,12625,057 25,235 2,758 -178
Iran3,296002,550 2,570 NA-20
Venezuela1,17100615 675 NA-60
Libya1,114001,205 1,161 NA44
Opec 1333,39626,6891,12629,427 29,6412,758-214
Non-OpecBaseTargeted OutputPledged Cut Oct Production Sep ProductionOct CutMonthly Chg.
Russia11,50011,0044969,718 9,758 1,782 -40
Kazakhstan1,7091,70631,450 1,357 259 93
Oman8838812893 888 -10 5
Azerbaijan7187171551 543 167 8
Malaysia5955941385 363 210 22
Bahrain2052050206 204 -1 2
South Sudan1301300160 153 -30 7
Brunei102102076 56 26 20
Sudan7575073 75 2 -2
Non-Opec 915,91715,41450313,512 13,3972,405 115
Mexico1,7531,75301,677 1,685 NA-8
Non-Opec 1017,67017,16750315,189 15,082--107
Combined 1943,73242,1031,62938,569 38,6325,163-63
Opec 2351,06643,856--44,616 44,723 -- -107

Gary Peach, New York