OPEC Records Wide Shortfall In October Production

Uche Cecil Izuora

The Organization of Petroleum Exporting Countries, OPEC+ coalition added 230,000 barrels a day, b/d to collective crude output in October.

This shows that its production shortfall widened to 690,000 b/d at a time when consuming countries were appealing for more crude.

Member nations in particular struggled to bring back supplies, with falls in production from west Africa highlighting volatility in that region’s output.

OPEC + leaders Saudi Arabia and Russia deployed their significant capacity to raise production by 100,000 b/d each.

This meant Moscow retained its recent record of staying 100,000 b/d above its quota, and much of this additional crude headed for export markets, following domestic refinery maintenance in September and another minor drop in deliveries to refiners last month. Russian crude exports are now around 400,000 b/d higher than they were in August.

Saudi Arabia also added 100,000 b/d of output and, as it lowered crude use for domestic power generation, returned to the export market in force — exports rose by 555,000 b/d from September to 6.92mn b/d in October, according to preliminary Argus tracking data.

The group’s second-largest non-OPEC producer, Kazakhstan, pumped 170,000 b/d more last month, to a level 70,000 b/d above its quota. Kazakh crude output has held high into early November, when it has breached the 1.7mn b/d mark achieved in April 2020.

Output from deal-exempt Venezuela hit a 19-month high, with two upgraders back online and a deal exchanging Merey crude for Iranian condensate enabling Caracas to dilute its extra-heavy Orinoco crudes.

Vortexa data indicate at least one 2mn bl cargo of Merey left for Iran last month, and 2.7mn bl of South Pars condensate arrived in September. Iran and Venezuela frequently conduct shipments on vessels that turn off their AIS transponders, compromising tracking estimates.

West African production gave up the gains of September, when Nigeria and Angola both experienced substantial short-lived recoveries. Output dropped last month in both countries, which each produced 240,000 b/d below their targets.

Nigerian production fell by 110,000 b/d, and Angolan output by 20,000 b/d.

Nigerian production has been hit by persistent infrastructural setbacks and sabotage, including force majeure on the Bonny Light stream since 27 October, following the shutdown of the 150,000 b/d Nembe Creek Trunk Line. Output has averaged 1.41mn b/d in the January-October period, 80,000 b/d below the 1.49mn b/d in the May-December 2020 period when the latest Opec+ deal prescribed more stringent quotas.

Group Managing Director of the Nigerian National Petroleum Corporation, Mele Kyari in September said the country’s output should sit near its target “by the end of October, or at the latest, middle of November.”

Output of Angola’s Gindungo grade averaged just 30,000 b/d for a second consecutive month, less than half the 63,000 b/d produced in the first half of the year, and dwindling output from mature fields is an ongoing Angolan challenge.

Non-OPEC, Malaysian output fell by 50,000 b/d in October, when there were compressor issues at Shell’s Gumusut-Kakap field. Preliminary December schedules for Kimanis suggest a production recovery.

The OPEC + coalition runs a compensation scheme for countries that surpass their assigned targets, but not for those who fail to meet that mark. Saudi energy minister Prince Abdulaziz bin Salman last week said while OPEC + production cuts are a commitment, each country has a “sovereign right” to produce what it wants up to its target.

OPEC + last week snubbed pleas from major consuming countries for additional crude, pressing ahead with a 400,000 b/d target increase in December.

Group ministers questioned whether current demand levels are a fleeting by-product of coal and gas shortages, with some pointing to seasonal declines in crude buying at the start of the year and a likely supply surplus in the first quarter.

Uncertainty will shroud the outlook for Iranian crude until at least 29 November, when Washington and Tehran will hold indirect negotiations that could end US commercial sanctions.

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