Opec+ added 500,000 b/d in July, remained below target

Opec+ deal participants raised collective crude output by 500,000 b/d in July, when the group began the final unwinding of its Covid-19 supply cuts.

But Argus' survey finds the group's production of 38.70mn b/d was still 2.75mn b/d below its quotas in the month. Dwindling spare capacity, underinvestment and sabotage have crippled the coalition's ability to return the roughly 10mn b/d it removed from the oil markets in May 2020. Opec+ will nominally complete that process this month, when its collective ceiling will rise by 648,000 b/d as it did in July. It has agreed to lift production by a further 100,000 b/d, shared pro rata, in September.

Among Opec members, Saudi Arabia saw the highest monthly output increase in July, made possible by firm export levels and a seasonal rise in domestic crude burn for air conditioning. Saudi seaborne exports surged by over 550,000 b/d on the month to around 7.37mn b/d in July, including its half of shipments from the Neutral Zone shared with Kuwait, according to preliminary Argus tracking. Analysts said that between 60,000 b/d and 120,000 b/d of these may have emerged from stocks.

Saudi Arabia can take its production up to 11mn b/d this month — a level it has reached only twice, according to its self-reported submissions to the Joint Oil Data Initiative (Jodi) covering January 2002-May 2022.

After months of prioritising refinery run increases, neighbouring Kuwait also sharply boosted exports to 1.86mn b/d, including the Neutral Zone. Libya, which is exempt from the Opec+ deal, raised output by 70,000 b/d after lifting force majeure restrictions at all oil field and terminals in mid-July. Output has been recovering since, with export shipments resuming from the Es Sider, Ras Lanuf, Mellitah and Zueitina terminals, although lingering fractures in the political landscape continue to cast a shadow over the long-term stability of Libya's oil sector.

Underperforming in July was Nigeria, whose output stood 570,000 b/d under the month's quota. Oil minister Timipre Sylva in late June said Abuja hoped to meet its production target by the end of August, but made no headway in July when force majeure was in place at the Bonny Light export terminal and output reduced of the Forcados and Bonga crude streams.

Venezuelan production declined by 60,000 b/d, after a fire knocked out a natural gas pipeline key to the Jose refining and petrochemical complex. Caracas has been struggling to process recent shipments of Iranian crude sent to state-owned PdV's 140,000 b/d El Palito refinery, which have had to be rerouted. Analysts said sanctioned Venezuelan and Iranian grades are starting to suffer from competition with heavily discounted Russian sour crude, which is making its way towards refiners in Asia-Pacific.

Non-Opec output rose by 220,000 b/d in July. Kazakhstan restored production at the offshore Kashagan field in mid-July, pushing the country's output to near 1.4mn b/d, and the return of Azerbaijan's ACG field from maintenance in late June added 40,000 b/d.

Kashagan's return was cut short when a gas leak was discovered on 3 August, reducing output by more than 200,000 b/d. The field resumed production on the night of 9-10 August. Kazakhstan, the non-Opec group's second-largest producer, has been falling sharply behind its quota since March.

Russian production rose marginally. Refinery consumption has increased in recent months, and product stocks rose by more than 500,000 bl in July, largely of diesel. Crude exports fell by just over 200,000 b/d, of largely Urals, in July, but seem to be recovering in August according to preliminary data from Vortexa.

A halt to Russian crude shipments through the southern arm of the Druzhba pipeline from 4 August appeared to be resolved today. The pipeline branch serves Hungary, Slovakia and the Czech Republic.

By Ruxandra Iordache

Opec+ wellhead production mn b/d July June* July target &#177; Target Opec 10 25.22 24.94 26.28 -1.06 Non-Opec 9 13.48 13.26 15.18 -1.70 Total 38.70 38.20 41.45 -2.75 Opec Saudi Arabia 10.80 10.63 10.83 -0.03 Iraq 4.53 4.50 4.58 -0.05 Kuwait 2.79 2.73 2.77 0.02 UAE 3.12 3.08 3.13 -0.01 Algeria 1.02 1.01 1.04 -0.02 Nigeria 1.23 1.26 1.80 -0.57 Angola 1.17 1.18 1.50 -0.33 Congo (Brazzaville) 0.25 0.26 0.32 -0.07 Gabon 0.21 0.20 0.18 0.03 Equatorial Guinea 0.10 0.09 0.13 -0.03 Opec 10 25.22 24.94 26.28 -1.06 Iran 2.56 2.56 na na Libya 0.67 0.60 na na Venezuela 0.65 0.71 na na Total Opec 13† 29.10 28.81 na na Non-Opec Russia 9.80 9.78 10.83 -1.03 Oman 0.87 0.85 0.87 0.00 Azerbaijan 0.56 0.52 0.71 -0.14 Kazakhstan 1.38 1.21 1.68 -0.30 Malaysia 0.39 0.40 0.59 -0.19 Bahrain 0.20 0.20 0.20 0.00 Brunei 0.07 0.07 0.10 -0.03 Sudan 0.06 0.06 0.07 -0.01 South Sudan 0.15 0.16 0.13 0.02 Total non-Opec† 13.48 13.26 15.18 -1.70 *revised figures †Iran, Libya and Venezuela are exempt from the agreement

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