Opec crude production rose to a seven-month high last month, climbing by 805,000 b/d from October thanks largely to a recovery in Libyan output.
Production by the 13 Opec members, including Libya, Iran and Venezuela that are exempt from output cuts, rose to 25.07mn b/d, the highest since April. Libyan output has made a rapid recovery since an agreement between warring factions ended port and oil field blockades in mid-September. Venezuelan crude production and exports recovered last month as China resumed direct export loadings and a tanker deficit that state-owned PdV blames on US sanctions eased. Iranian output also rebounded marginally.
Production by Opec countries subject to cuts under the Opec+ agreement increased by 130,000 b/d, although most countries still produced at or below their individual targets (see table). Only Congo (Brazzaville) and Gabon, two of the smaller producers, were non-compliant. Total Opec+ adherence was 100pc as modest overcompliance by Opec members offset 93pc adherence by non-Opec participants.
Opec+ agreed on 3 December to increase their combined output by 482,000 b/d in January, and to determine production levels for February, March and April at monthly meetings. The agreement to raise quotas slightly “allows to have a stable market, oil prices have stabilized in a predictable range,” Russian deputy prime minister Alexander Novak said. “During the period of [the current] agreement oil price is on average between $40/bl and $45/bl. I would remind that in April, which was the most difficult month, the average price was $26.6/bl. Now in December we see $48-49/bl”.
Front-month Ice Brent crude futures rose today to above $50/bl for the first time since early March.
Opec+ ministers will next meet on 4 January. Novak said that “a new approach with monthly meetings will allow us to take more accurate and weighted decisions, so that we consider the market situation and recover production gradually, without overheating the market and without overproduction.”
Global oil demand is still 6mn-7mn b/d below pre-crisis level, he said.
Russia will be able to increase its quota by 125,000 b/d on 1 January, according to Novak. Internal Opec+ documents seen by Argus give a more exact 126,000 b/d rise, which will bring Russia’s quota to 9.119mn b/d.
“This decision, in our view, is fully in line with the interests of Russia,” Novak said. But Russia produced nearly 80,000 b/d over its target last month, meaning it will only be able to raise output by close to 50,000 b/d in January, compared with its November level, in order to be fully in line with its new ceiling. Russian has on average produced nearly 80,000 b/d above its quota each month between May and November.
Quota busting
Russia and 12 other countries, including Iraq and Nigeria, still must make up for previous overproduction through additional cuts under a compensation scheme that Opec+ has agreed to extend until the end of March. But most overproducers failed to compensate for their past lack of adherence in November. Iraq produced at its target following weather-related disruption to exports, but will have to produce just over 160,000 b/d on average below its quota over the December-March period to compensate for past excess. Saudi Arabia has taken a hard line with Iraq and Nigeria over their lack of compliance, but for the sake of holding the alliance together has not publicly criticised Russia for exceeding its cap. Saudi oil minister Prince Abdulaziz bin Salman has described the compensation scheme as “not as successful as we were hoping”.
The UAE has a new ceiling of 2.626mn b/d from January, and Abu Dhabi’s state-owned Adnoc will ease supply cuts to its customers in the Asia-Pacific region from 1 January.
By Denise Albrighton
Opec wellhead production b/d
November October November target
Saudi Arabia 8,960 8,940 8,993
Iraq 3,800 3,850 3,804
Kuwait 2,270 2,270 2,297
UAE 2,520 2,460 2,590
Algeria 840 840 864
Nigeria 1,490 1,460 1,495
Angola 1,210 1,150 1,249
Congo (Brazzaville) 270 250 266
Gabon 170 165 153
Equatorial Guinea 100 115 104
Opec 10 21,630 21,500 21,815
Iran 1,980 1,950 na
Libya 1,070 465 na
Venezuela 390 350 na
Total Opec 13* 25,070 24,265 na
*Iran, Libya and Venezuela are exempt from the agreement
– Argus