OPEC+ Misses Oil Supply Target as Over-compliance Hits 117% in November
Emmanuel Addeh in Abuja
Compliance with oil production cuts by the Organisation of Petroleum Exporting Countries (OPEC) and its allies known as OPEC+ stood at 117 per cent in November, up from 116 per cent the previous month.
This indicated that the group’s production levels continued to stay below agreed targets in the month under review, with compliance from the 10 OPEC countries participating in the production cut reaching 122 per cent and participating non-OPEC countries achieving 107 per cent.
The situation has further worsened as some members, mostly led by Nigeria have continued to struggle to increase output.
The figures excluded Mexico, which was yet to accept an official quota since July last year, but remains part of the agreement and sometimes features in the group’s calculations.
Data seen by Argus showed the conformity of the 10 OPEC nations that participate in the production cut effort climbing to 122 per cent in November from 121 per cent in October, and non-OPEC compliance rising to 107 per cent from 106 per cent.
Comparatively, the group remained 580,000 bpd below its 37.94 million bpd November production target, even though collective output rose by 410,000 bpd month on month.
OPEC+ producers continue to face difficulties in bringing back production at a time when the group is pressing ahead with monthly increases.
The coalition would raise its output goal by 400,000 bpd to 38.34 million bpd this month, and by the same amount again to 38.74 million bpd in January.
The gap between the theoretical production target and what the group delivers may explain the decision to proceed with output increases at a time of high uncertainty caused by the new, more transmissible Covid-19 Omicron variant.
This has led to several countries adopting restrictions in the run-up to year-end festivities.
Several OPEC+ members, particularly in West Africa, have experienced infrastructural collapse, underfunding and sabotage in recent months, challenging their efforts to raise production
In the preceding month compliance by members of the cartel averaged 116 per compared with 115 per cent in September, according to documents, indicating that the group continued to produce less than its agreed targets.
The over-compliance was partly driven by Nigeria and Angola which had been struggling to grow production, with both countries around 240,000 bpd under their respective OPEC+ targets last month.
While over-compliance was welcomed last year when demand collapsed in the wake of the pandemic, the OPEC+ group now faces pressure from key oil-consuming countries to raise output faster to soften global oil prices.
Nigeria’s waning oil infrastructure, especially upstream, due to years of under-investment and last year’s OPEC-induced shut down of some oil assets aimed at complying with the production cuts on the back of the Covid-19 pandemic, have combined to hobble Nigeria’s production capacity.
For months, the country has been unable to meet its production obligation to the producers’ group, further leading to a situation where demand outstripped supply by at least 600,000 bpd in October.
As a result of the increasing underperformance, OPEC produced barely half the oil production increase it had planned for October as African members, especially Nigeria and Angola continued to struggle with output losses.
But despite Nigeria regaining the top spot among crude oil producing countries in Africa with the nation’s crude oil production averaging 1.27 million barrels per day in November, according to the latest monthly report from OPEC, it still failed to meet its allocation.
The previous month, Nigeria had lost its Africa’s top oil producer status to the North African country, as its crude oil production continued to fall mainly due to ageing upstream infrastructure.
In that month, Nigeria’s oil output fell to about 1.23 million barrels per day from about 1.25 million bpd the previous month, with Libya, which overtook Angola as the second-biggest producer on the continent in December last year, seeing its oil production rise to 1.24 million bpd.
But in November, Nigeria pumped an additional 47,000 barrels per day when compared to the 1.228 million bpd produced averagely in the month of October 2021.