Opec output rises offset Russian fall in June

Opec+ production edged up in June ahead of planned cuts this month, as increased output from Opec members offset a fall in Russian supply.

Russian production fell for a third consecutive month to its lowest since May 2022, Argus estimates. This helped push output by the group's non-Opec members down by around 20,000 b/d on the month. But production by the 10 Opec members subject to targets was 60,000 b/d higher, leaving combined output up marginally at 36.76mn b/d (see table).

The eight Opec+ members that agreed to make additional cuts of 1.16mn b/d from May achieved a combined reduction of 1.06mn b/d in June, falling nearly 100,000 b/d short of their effective target. Algerian output dipped below its ceiling following a drop in exports, while the continued absence of seaborne Kirkuk exports kept Iraqi production below target for a second month. Saudi production fell below its implied target but most other producers were still pumping above their effective quotas, Argus estimates.

Saudi Arabia's production was just under its ceiling of 9.98mn b/d in June but is scheduled to fall to just under 9mn b/d this month and in August, following Riyadh's announcement that it is extending its 1mn b/d unilateral crude production cut for July into August. Algeria's production ceiling is scheduled to fall to around 940,000 b/d after it announced a production cut of 20,000 b/d for next month.

Overall Opec production rose last month thanks mainly to increases from Nigeria, Iraq, and Gabon. Iraqi production rebounded to its highest since March, when Kirkuk flows from the Kurdistan region in northern Iraq through Turkey first came to a halt. Kirkuk loadings at Turkey's Ceyhan terminal remain suspended, although around 10,000 b/d of the grade was trucked to Jordan in June.

Iraq's recovery followed a resumption in exports from the Qayarah oil field in Nineveh province. The field was recaptured from Islamist group Isis in 2017, but had been badly damaged after Isis set a number of oil wells on fire.

Nigerian production increased for a second month as Bonny Light output continued to rise steadily following Shell's lifting of a long-standing force majeure in March. Erha loadings more than doubled in June, after the grade's export operations were disrupted by strikes at ExxonMobil's Nigerian assets in April.

Notable success

Output by Opec producers without targets has mostly been on the up. Iranian crude production has passed the 3mn b/d mark, according to oil minister Javad Owji. Argus assessed the country's output at 2.91mn b/d in June, the highest since November 2018. Tehran's success in boosting output this year has been notable, given that talks to revive the 2015 nuclear deal have hit a brick wall and there has been no movement on sanctions relief.

Venezuelan production fell in June, according to the oil ministry, state-owned PdV and other industry sources, one of the first major drops since February. A loosening of some US sanctions late last year helped spur production this year, and even boosted optimism that the country could reach 1mn b/d by August, but major infrastructure constraints continue to hinder efforts.

A new threat has arisen to Libya's political stability and its crude production. Khalifa Haftar, head of the Tobruk-based Libyan National Army based in the east of the country, threatened on 3 July to use military force unless the politically fragmented country agreed a mechanism for the "fair" distribution of oil revenues by the end of August. Libya's oil minister Mohamed Oun said on 5 July that the oil revenue distribution mechanism demanded by Haftar would be "very difficult to implement".

By Denise Albrighton