- Nigeria records highest underperformance with 224,000 bpd
By Emmanuel Addeh
The Organisation of Petroleum Exporting Countries (OPEC) and its allies boosted crude oil output by 470,000 barrels per day in September, but with a number of members, including Nigeria, still struggling to reach their quotas.
OPEC’s 13 countries pumped 27.29 million bpd during the month, according to latest data, up 320,000 bpd from August, an S&P Global Platts survey stated, while Russia and eight other partners added 13.44 million bpd, up 150,000 bpd.
But for Nigeria and a few others, years of underinvestment exacerbated by the COVID-19 oil price crash have limited their ability to pump more, leading to questions over whether the OPEC+ alliance will be able to fully unwind its historic pandemic-prompted output cuts by the end of 2022, as planned.
According to the data, Nigeria, for example, underperformed its quota by the largest volume in September, hitting as much 224,000 bpd, as key crude grade, Forcados spent the third of the month on force majeure.
In addition, damage to the Nembe Creek Trunk Line severely impaired exports of Bonny Light as the West African country was only able to pump 1.39 million b/d, up 30,000 b/d from August, S&P said.
Angola, which produced 1.15 million bpd, according to the survey, has not hit its allocation for months, with its mature fields in decline, though a few new projects have recently come online that could add some volumes in the coming months.
Malaysia was the non-OPEC member with the largest gap below its cap, with sources saying its flagship Kimanis crude experienced reduced flows due to issues at an offshore platform.
OPEC members Iran and Venezuela, both under heavy US sanctions that target their oil exports, are exempt from having quotas under the agreement, as is Libya, which has seen much volatility in its production due to civil strife.
Combined, the three countries’ crude output was flat month-on-month, according to the survey.
The Platts figures, which measure wellhead production, are compiled by surveying oil industry officials, traders and analysts, as well as reviewing proprietary shipping, satellite and inventory data.
OPEC+ ministers plan to convene next on November 4 to decide on December production targets, while the OPEC+ supply accord calls for quotas to collectively rise 400,000 bpd every month, although that can be adjusted, if ministers see fit.
Despite the increases, the 19 members with production quotas under the OPEC+ supply accord were a combined 570,000 bpd below their allocations for the month, bringing compliance to 111.5 per cent.
The shortfalls contributed to what many analysts said was a tight market. Oil prices have surged in recent weeks, with dated Brent hitting three-year highs and key customers of OPEC+ crude, such as the US, calling for more supplies to tame the rally.
OPEC+ members with ample spare production capacity, such as Saudi Arabia, Russia and Iraq, did ramp up output in September. In fact, Russia and Iraq both overproduced their quotas, according to the survey, and have been among the alliance’s least compliant members.
Russia pumped 9.86 million bpd, above its target of 9.70 million bpd, while Iraq surged to 4.18 million bpd, exceeding its allocation of 4.11 million bpd, the survey found. At 9.66 million bpd, an increase of 90,000 bpd over August, Saudi Arabia was quota-compliant.
Non-OPEC Kazakhstan also saw a major rebound in its production, with the end of heavy maintenance at its Tengiz field pushing its output up 110,000 bpd to 1.41 million bpd in September, according to the survey.
But several other countries faced significant disruptions to their operations, many due to damaged infrastructure.
Delegates have said that the continued inability of some members to produce at their quotas means that actual output levels likely will remain below what the deal has prescribed, which could delay what many analysts have forecast, of market oversupply as soon as January.
But in the short term, if oil prices keep going up, pressure could mount on the members with spare capacity to produce more. Platts Analytics estimated that by the end of 2021, global sustainable spare capacity will fall to 2.5 million bpd, 97 per cent of which will be held by Saudi Arabia, the UAE, Kuwait, Russia and Iraq.
In July 2021, OPEC+ ministers agreed to raise production quotas by 400,000 bpd every month, which puts the alliance on pace to fully taper its historic 9.7 million bpd output cut agreement by late 2022.
The quotas are determined from an October 2018 baseline production level, except for Saudi Arabia and Russia, which were given baselines of 11 million bpd. Iran, Libya and Venezuela are exempt from the cuts.
Meanwhile, oil prices rose more than two per cent on Monday, extending gains as an energy crisis gripping major economies showed no sign of easing amid a pick-up in economic activity and restrained supplies from major producers.
Brent crude was up $1.70, or 2.1 per cent, at $84.09 a barrel, its highest since October 2018, while U.S. West Texas Intermediate (WTI) crude rose $2.08, or 2.6 per cent, to $81.43 for its highest since late 2014.
Prices have risen as more vaccinated populations are brought out of coronavirus lockdowns, supporting a revival in economic activity, with Brent advancing for five weeks and U.S. crude for seven.
