March 10, 2023


Opec-Plus: February Output Gain Nullifies October Cut

  •   Crude oil production by Opec-plus producers with a quota jumped by 360,000 b/d in February to 38.36 million b/d.
  • The alliance’s oil production is now back to October’s level despite the agreement to slash output by 2 million b/d.
  • Russia and Nigeria led the increase in monthly output, but these barrels could easily disappear.

Including the four countries without a quota — Iran, Libya, Venezuela and Mexico — Opec-plus’ crude oil production in February came to 44.36 million barrels per day, according to Energy Intelligence’s assessment. This is a 450,000 b/d increase on January and a four-month high.

At 38.36 million b/d, output by the 19 countries that are part of the supply cut agreement was 1.74 million b/d short of the monthly target, the lowest such shortfall in 11 months. But with Russia’s announcement of a reduction in exports by 500,000 b/d, and the country’s refineries set to begin maintenance, the alliance is likely headed toward a decline in production in March.

Created with Highcharts 9.0.0('000 bbl)OPEC-PLUS CRUDE OIL PRODUCTIONJan'22Feb'22Mar'22Apr'22May'22Jun'22Jul'22Aug'22Sep'22Oct'22Nov'22Dec'22Jan'23Feb'2337,00037,25037,50037,75038,00038,25038,50038,750Note: Output by 19 producers with monthly target. Source: Energy IntelligenceJan'22 Opec-Plus Production: 37,631

October Deal Rendered Null

Opec-plus’ agreement in October to slash crude output by 2 million b/d, starting in November and lasting until December 2023, elicited a storm of criticism at the time, but was effectively nullified in February.

Since October, actual production by the 19 members has declined by only 73,000 b/d, according to the Energy Intelligence assessment, a far cry from 2 million b/d. To be sure, at the time, Opec officials and analysts suggested that the actual physical barrels that would be taken from the market would be around 1 million b/d, but even that estimate was way off the mark.

Over the four months under discussion, Russia, for instance, lifted output by 185,000 b/d, Kazakhstan and Angola each by 200,000 b/d, and Nigeria by a whopping 450,000 b/d.

Saudi Arabia, in the meantime, reduced its barrels by 550,000 b/d to 10.44 million b/d, while the United Arab Emirates and Kuwait have both cut production by over 100,000 b/d.

And yet, adding insult to injury for the alliance, the price of the Opec Basket of grades has declined from approximately $94 in early October to $82 on Mar. 9. On the face of it, the cut has shored up neither supplies nor prices but it might have prevented prices from crashing.

Created with Highcharts 9.0.0('000 bbl)OPEC-PLUS: OCT'22 CUT EFFECT NULLIFIEDOct'22Nov'22Dec'22Jan'23Feb'23-600-400-2000200Source: Energy Intelligence

It has, however, reduced the paper shortfall in production. In October, the alliance was 3.7 million b/d short of its monthly target; in February, it was 1.7 million b/d. In this sense, the 2 million b/d reduction was accomplished.

Created with Highcharts 9.0.0('000 bbl)OPEC-PLUS SHORTFALL REACHES 11-MONTH LOWJan'22Feb'22Mar'22Apr'22May'22Jun'22Jul'22Aug'22Sep'22Oct'22Nov'22Dec'22Jan'23Feb'2301,0002,0003,0004,000Source: Energy Intelligence

Laggards Surprise

Given the 1.7 million b/d shortfall — which essentially is a measure of how much a group of alliance producers can no longer operate at capacity — Opec-plus could theoretically soon exceed the October 2022 output level.

For this to happen, production by Russia, Nigeria, and Angola would have to grow. Together these three account for 1.25 million b/d of the 1.7 million b/d shortfall.

Russia, which produced 9.91 million b/d, the highest level since last March, is approaching capacity of 10.2 million b/d. More importantly, however, the country intends to reduce exports by 500,000 b/d this month in an effort to narrow the discounts on its exported grades, especially Urals blend. If realized, this cut would significantly alter Opec-plus supply outlook and raise Russia’s shortfall to its permitted production level from 570,000 b/d to 1.07 million b/d.

Output by Angola was 1.14 million b/d in February, our assessment shows, as the TotalEnergies-operated oilfield Dalia was offline for repairs. But production in the West African country has hit a wall, leveling off in the 1.1 million b/d range for the past year. The last time output surpassed 1.2 million b/d was in August 2021.

Nigeria, meanwhile, was assessed at producing 1.38 million b/d, the highest since June 2021, as efforts to untangle midstream bottlenecks and crack down on theft begin to bear fruit. Still, production is regarded as non-reliable and prone to setbacks. Earlier this month a blast on a Shell-owned pipeline in the Niger Delta killed at least a dozen people. It is unclear whether this would have a significant impact on March production.

Other laggards, such as Iraq, Azerbaijan and Malaysia, are believed to be stuck at capacity due to years of underinvestment in upstream and critical infrastructure.

February 2022 Opec-Plus Compliance
OpecBaseTargeted OutputVoluntary CutFeb ProductionJan ProductionFeb CutCompliance Rate
Saudi Arabia11,50010,47852610,441 10,408 1,059 101%
Iraq4,8034,4312204,261 4,291 512 133
UAE3,5003,0191603,042 3,038 462 189
Kuwait2,9592,6761352,697 2,735 224 66
Nigeria1,8291,742841,381 1,185 644 667
Angola1,5281,455701,140 1,199 329 370
Algeria1,0571,007481,025 1,018 39 NA
Congo (Br.)32531015294 194 131 773
Gabon1871779200 179 8 NA
Eq. Guinea127121677 52 75 1,150
Opec 1027,81525,4161,27324,558 24,299 3,257 256
Iran3,296002,505 2,485 NANA
Libya1,114001,195 1,155 NANA
Opec 1333,39625,4161,27328,97328,6193,257256
Non-OpecBaseTargeted OutputVoluntary Cut Feb Production Jan ProductionFeb CutCompliance Rate
Russia11,50010,47852699099,813 1,687 221
Kazakhstan1,7091,6287816641,689 20 NA
Oman88384140856843 40 0
Azerbaijan71868433531533 185 461
Malaysia59556727390399 196 626
Bahrain2051969167137 68 656
South Sudan1301246125133 -3 NA
Brunei1029758074 28 460
Sudan757238480 -5 NA
Non-Opec 915,91714,68772713,80613,7012,111 290
Non-Opec 1017,67016,44072715,38615,285----
Combined 1943,73240,1032,00038,364 38,0005,368 268%
Opec 2351,06641,856--44,359 43,904 ----

Gary Peach, New York