The Crude Report: Opec+ meets again

Author Argus

With Opec+ slated to meet this week to discuss the state of the global crude oil industry and adjust their plans as needed, this episode of The Crude Report podcast evaluates the situation thus far.

Sean Cronin, editor of Argus Global Markets, joins to take look at how compliance is so far and how much production is expected to rise as the first cut phase is now complete.

Global crude market highlights


Jessica: Hello, and welcome to Argus' The Crude Report, a podcast series on global crude oil markets. This is Jessica Tran for Argus Media.

Opec recently increased its crude production for the first time since April as three Mideast Gulf members undid their voluntary cuts. In total, the OPEC Group increased production by 970,000 b/d from June to July, meaning the total July production volume was around 23 mn b/d. Opec as a core group, obviously, has quite a large global market share, which grows even larger when considering the wider Opec+ group. For Russia, the largest of the “plus” group, their production growth is slated for exports as their domestic refiners are unable to absorb the excess output.

Here with me is Sean Cronin, the editor of Argus Global Markets, a service covering the latest international oil market developments. Hi, Sean, thanks for joining me.

Sean: Thanks, Jessica.

Jessica: So, let's start with an update on the Opec+ cut agreement, have the various Opec core and "plus” members kept their part of the deal?

Sean: Yes, by and large, most of them have. It's a historically large deal and the rates of compliance are very high. There are some exceptions, of course, Nigeria and Iraq have not been cutting by as much as they've meant to, but they're looking to compensate for overproducing in past months.

Jessica: Okay. Great. So, I guess let's take a closer look at Russia, which is the largest “plus” producer. What's going on there specifically?

Sean: Well, the agreement comes in stages. So, after the first very deep cuts that lasted for three months starting this month, there's a slightly more relaxed production level. So, under the quota system, Russia has nominally got room to increase production by 500,000 b/d, but because it was slightly under-complying in July, it can de facto raise its production by 400,000 b/d. So, it's still quite a bit of headroom, but they were producing 100,000 b/d too much in July.

Jessica: So, speaking of July, Russia did say back in July that their increased production would be absorbed domestically, but it, unfortunately, seems that the domestic demand isn't there. So, with export markets being the only other option, how much of this Russian crude do we think will go into global markets?

Sean: Well, most of the extra production is medium sour Urals and it's going West out to the Baltic and Black Sea ports and through the pipeline system into Central Europe. We've got some preliminary August cargo loading schedules, so we're looking at possibly about a 300,000 b/d increase in loadings of Urals' cargoes from the Black Sea and Baltic ports end of August. And that's on top of all the pipeline deliveries, but it's having a definite effect on markets in Europe. It's pushing prices down. We've got Urals now at very nearly a $1 discount to the North Sea Dated benchmark. And this is after it was trading at anything up to a dollar over the benchmark, which was a really very unusual development. Looking to the East, there are cargo loadings of Russia's light sweet ESPO Blend crude, and they're running significantly lower from Kozmino. And as it stands, it looks like it might leave Russia short of its 2020 target to produce 690,000 b/d out of Kozmino.

Jessica: And I understand that the Opec+ committee meetings are this week. What's their sentiment on market recovery and do you think they'll adjust their plans?

Sean: Well, for Opec committees to meet this regularly every month is a testament to how keen they are to be able to fine-tune their plans on an ongoing basis. It's very difficult to get a read right now on how they think privately the market is going, but I think it would be a surprise if they adjusted their plans right now. I don't think there are enough signals coming back from the market to say whether they're overshooting or undershooting with their production.

Jessica: Yeah. And I guess with the Opec still having a significant market share of global oil, everybody's always looking toward them to see what they're up to. So, thank you so much for your time today, Sean.

Sean: Pleasure, Jessica.

Jessica: For vital insight into the latest international oil market developments, consider subscribing to Argus Global Markets. You can find more information on this service at Thanks for tuning in. And we look forward to your joining us on the next episode of The Crude Report.

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