Opec+ gets historic output deal off to a good start
The Opec+ coalition made a strong start to its new output restraint agreement, with the 20 participating countries falling just 1.1mn b/d short of their collective target to remove 9.7mn b/d of crude from the market last month, largely from an October 2018 baseline.
Combined output from the deal participants was 35.2mn b/d in May, down by 8.8mn b/d from April and by 8.6mn b/d from the baseline, Argus estimates. This puts May's overall compliance at 89pc, with the 10 Opec participants achieving 85pc of their pledged cuts and their 10 non-Opec counterparts hitting 96pc.
Overall Opec production — including Iran, Libya and Venezuela, which are exempt from the deal — dropped by around 6.2mn b/d on the month to 24.2mn b/d, the lowest since April 2002.
Saudi Arabia, its traditional Mideast Gulf allies Kuwait and the UAE, and this year's Opec presidency holder Algeria maintained their previous discipline with output obligations, achieving 90-102pc compliance.
Saudi production fell by 3.1mn b/d from April's record high to 8.5mn b/d in May — the lowest since November 2010 — with exports from Saudi terminals down by just under 3mn b/d on the month to 6.3mn b/d, according to preliminary tracking data. Shipments from the Neutral Zone region, which Saudi Arabia shares with Kuwait, rose by 14,000 b/d to 127,000 b/d last month, although some of May's exports could have come from production in previous months.
Opec's chronic laggards Iraq and Nigeria continued to underperform, meeting just 52pc and 60pc of their targets, respectively. Baghdad implemented cuts at southern fields run by state and international oil firms last month, but ongoing budget wranglings meant there was no meaningful contribution from the semi-autonomous Kurdish region in the north. Argus estimates that Nigeria was 170,000 b/d above its target in May, broadly in line with the oil ministry's figures. But Nigeria's current output is well below its quota and that "will translate to full compliance by end of June", the ministry said earlier this week.
Kazakhstan was the standout quota-buster on the non-Opec side, meeting just 63pc of its pledged cut. But this was more than offset by a strong performance from other non-Opec participants, notably Russia. Moscow has been slow to reduce output at the start of previous Opec+ deals, but it cut production by an impressive 1.8mn b/d last month compared with April, leaving it just 100,000 b/d above its May quota of 8.5mn b/d. Mexico, whose staunch objections to deeper cuts prolonged the Opec+ discussions in April, was 135pc compliant with its pledge to cut 100,000 b/d.
Opec and the wider Opec+ group have brought forward online meetings to discuss the production restraint deal to tomorrow from the initial schedule of 9-10 June.
Discussions will centre around whether to extend the 9.7mn b/d cut beyond June or stick to the original plan of moderating the reduction to 7.7mn b/d in the second half of the year. Saudi Arabia and Russia support a one-month extension, according to an Opec delegate. But countries that overproduced in May will be asked to pledge compliance going forward and agree to an as yet undetermined "compensation mechanism", the delegate said.
| Opec wellhead production | mn b/d | |||
| May | Apr* | Target for May | Compliance (%) | |
| Saudi Arabia | 8.50 | 11.60 | 8.49 | 100 |
| Iraq | 4.10 | 4.57 | 3.59 | 52 |
| Kuwait | 2.23 | 3.10 | 2.17 | 90 |
| UAE | 2.48 | 3.85 | 2.45 | 95 |
| Algeria | 0.81 | 1.00 | 0.82 | 102 |
| Nigeria | 1.58 | 1.71 | 1.41 | 60 |
| Angola | 1.28 | 1.30 | 1.18 | 71 |
| Congo (Brazzaville) | 0.28 | 0.27 | 0.25 | 61 |
| Gabon | 0.19 | 0.19 | 0.14 | -7 |
| Equatorial Guinea | 0.09 | 0.12 | 0.10 | 128 |
| Opec 10 | 21.54 | 27.71 | 20.60 | 85 |
| Iran | 2.05 | 2.00 | na | na |
| Libya | 0.08 | 0.08 | na | na |
| Venezuela | 0.55 | 0.58 | na | na |
| Total Opec 13Ϯ | 24.22 | 30.37 | na | na |
| Non-Opec crude production | mn b/d | |||
| May | Apr* | Target for May | Compliance (%) | |
| Russia | 8.59 | 10.39 | 8.49 | 96 |
| Mexico | 1.62 | 1.72 | 1.65 | 135 |
| Oman | 0.68 | 0.95 | 0.68 | 102 |
| Azerbaijan | 0.54 | 0.68 | 0.55 | 109 |
| Kazakhstan | 1.47 | 1.64 | 1.32 | 63 |
| Malaysia | 0.40 | 0.44 | 0.46 | 140 |
| Bahrain | 0.16 | 0.21 | 0.16 | 87 |
| Brunei | 0.07 | 0.10 | 0.08 | 143 |
| Sudan | 0.06 | 0.07 | 0.06 | 100 |
| South Sudan | 0.10 | 0.14 | 0.10 | 100 |
| Total | 13.69 | 16.33 | 13.55 | 96 |
| *revised | ||||
| Ϯ Iran, Libya and Venezuela are exempt from the deal | ||||
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Kazakhstan outlines Opec+ compensation plan
Kazakhstan outlines Opec+ compensation plan
London, 3 May (Argus) — Opec+ member Kazakhstan has submitted a plan to Opec detailing how it intends to compensate for producing above its crude production target in the first four months of the year. Kazakhstan and Iraq — which has also submitted a compensation plan — are the Opec+ alliance's largest overproducers and a key reason why the group exceeded its overall production in the first three months of the year . Kazakhstan's energy ministry said it produced above its target by 129,000 b/d in January, 128,000 b/d in February, and 131,000 b/d in March, according to secondary source estimates. Opec secondary sources, of which Argus is one, have yet to formally submit their production estimates for April, but Kazakhstan said it is factoring preliminarily overproduction of 100,000 b/d for April. The ministry said it kept oil production high because of high winter demand for natural gas — much of its gas production is associated and is produced alongside its oil. Kazakhstan said it would start its compensation plan in May with an initial cut of 18,000 b/d below its official target of 1.468mn b/d. It would then stick to its target in June and July before implementing a cut of 131,000 b/d in August, none in September, 299,000 b/d in October, 40,000 b/d in November and zero in December. The cuts have been designed to coincide with scheduled maintenance at the country's key oil fields of Kashagan and Tengiz, the ministry said. Kazakhstan would have to reduce its output by 149,000 b/d in May compared with its March production of 1.599mn b/d to meet its pledge, according to Argus calculations. The compensation plan is set to be adjusted once a final figure for April is available. The plan would be further adjusted to accommodate any change in the Opec+ alliance's output policy — for which a meeting is scheduled to take place on 1 June in Vienna. Opec has been increasing pressure on members exceeding their targets. It called last month on countries that have overproduced to submit detailed compensation plans by the end of April. The Opec+ alliance has implemented a series of cuts — voluntary or collective — worth a combined 5.4mn b/d since October 2022 in a self-described bid to "support the stability and balance of the oil market". The latest round of "voluntary" output reductions by several members came into force in January and is due to run until the end of June. By Aydin Calik and Nader Itayim Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Iraq sets plan to compensate for excess Opec oil output
Iraq sets plan to compensate for excess Opec oil output
Dubai, 3 May (Argus) — Iraq, Opec's second-largest oil producer, has submitted a plan to the Opec secretariat outlining how it will compensate for producing above quota in the first quarter of 2024. The plan indicates that Baghdad will make compensatory cuts from May through to the end of this year, although its breakdown could be tweaked if its April production is again above quota, based on average production estimates issued by the seven Opec secondary sources, including Argus . Opec+'s Joint Ministerial Monitoring Committee (JMMC) said in its 3 April meeting that members that have produced above their quotas so far this year would need to submit plans to compensate for the excess. Iraq and Kazakhstan, which Opec said has also submitted its own compensation plan, have produced the most excess excess volumes in the Opec+ group since the beginning of the year. The JMMC oversees compliance to the coalition's crude production cuts and studies market dynamics. Iraq produced 194,000 b/d above target in January, and overshot by 217,000 b/d and 193,000 b/d in February and March, respectively. To compensate for this, Baghdad plans to produce 50,000 b/d below its quota between May and September, 100,000 b/d below quota for October and November, and 152,000 b/d below its quota for December. Iraq has been working to a quota of 4mn b/d since the start of the year, including two rounds of voluntary cuts it made in April and November last year. Baghdad will submit its crude production figure for April later this week, it said. Any extra volumes produced will also be factored into the country's compensation plan. To meet obligations, Baghdad says it will cap its crude burn at 75,000 b/d and maintain refining intake to between 400,000 b/d and 500,000 b/d through to the end of this year, according to Iraq's Opec national representative Mohammed Adnan Ibrahim Al-Najjar. But Iraq has yet to decide whether it will extend a 3.3mn b/d cap on exports, in place since April , beyond the second half, as it will depend on "Opec+ agreements [in the June meeting] and [the needs of] Iraq's economy over the coming months," the oil ministry told Argus last week. When needs must With the summer season around the corner in the Mideast Gulf region, Iraq has pushed the majority of its compensation into the last three months of the year. Iraq in summer often experiences extreme heatwaves resulting in a major spike in electricity demand. Power shortages during the summer season have fuelled political unrest in Iraq in recent years. To strike a balance between its Opec+ commitments and avoid similar scenarios this year, Iraq says it will import higher levels of gas from neighbouring Iran, with Baghdad also beginning to benefit from electricity supply from Jordan through a newly-established power line which became operational at the beginning of April. Iran and Iraq finalised a five-year supply agreement at the end of March, which will see Tehran send "up to 50mn m³/d" of gas to Iraq, Iraq's electricity minister Ziad Ali Fadel said. But Iraq's persistent overproduction, which has drawn scrutiny within Opec+, might be difficult to address, especially as Iraq blames it on its inability to oversee production in the semi-autonomous Kurdistan region in the north of the country. Most Iraqi Kurdish crude output is directed to local refineries or sold on the black market following the closure of the export pipeline that links oil fields in northern Iraq to the Turkish port of Ceyhan just over a year ago. Iraq's federal oil ministry says its Kurdish counterpart has stopped providing production data, but on 3 May said it estimates Kurdistan Regional Government (KRG) crude production to be between 40,000 b/d and 50,000 b/d. Meanwhile, Iraq's oil minister Hayyan Abdulghani on 2 May announced that two joint Baghdad-Erbil committees have been formed to resolve the issue of contracts between Erbil and the international oil companies operating in the Kurdistan region. By Bachar Halabi Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
US regulator slams executive over Opec 'collusion'
US regulator slams executive over Opec 'collusion'
Washington, 2 May (Argus) — US antitrust regulators for the first time took action against a leading US oil executive over his alleged "collusion" with Opec, but the producers' alliance itself was not a target of investigation. The Federal Trade Commission (FTC) today issued a proposed consent order barring former Pioneer Natural Resources chief executive Scott Sheffield from joining the board of ExxonMobil following its $59.5bn takeover of Pioneer. FTC accused Sheffield of organizing "anti-competitive coordinated output reductions between and among US crude oil producers" and members of Opec and the broader Opec+ alliance. "Opec and Opec+ are cartels that exist to control global crude oil production and reserves," FTC said. The specific charges against Sheffield relate to the outspoken executive's frequent public appearances where he opined on US companies' desired production levels, his meetings and frequent communications with Opec officials since 2017 and his advocacy of drastic production cuts by US companies as global demand fell sharply at the beginning of the Covid-19 pandemic in 2020. Opec under then secretary general Mohammed Barkindo began active outreach to independent US producers, starting in March 2017 with private dinner discussions held on the sidelines of IHS CERAWeek conferences in Houston, Texas. Barkindo hosted similar discussions at CERAWeek in 2018 and 2019, in addition to hosting some of the US companies' chief executives at Opec seminars in Vienna. FTC references Sheffield's public comments following those meetings and alleges that Sheffield kept in frequent touch with Opec officials via messaging service WhatsApp and other means to discuss production levels and prices. Barkindo at the time said that production cuts and prices were never on the agenda of his meetings with the US shale producers and that his organization wanted to better understand the US companies' technological innovation and to compare market outlooks and forecast models. Barkindo in the same time frame held similar discussions with major US hedge funds and money managers. US oil executives polled by Argus in 2017-20 also said that their discussions with Barkindo and other Opec officials revolved around market fundamentals. The US oil industry broadly felt that it was benefiting from a policy of production cuts Opec was implementing as it supported prices at a time when the US domestic production and crude exports grew uninterrupted. Former president Donald Trump took credit for engineering a breakthrough agreement in April 2020 to remove more than 10mn b/d of global crude supply by brokering an agreement between Saudi Arabia, Russia and other Opec+ producers. Even without prodding from Trump, US producers cut back production cuts in 2020 as transportation fuel demand and prices fell sharply in the first months of the pandemic. FTC singled out Sheffield for allegedly coordinating his company's production levels with Opec. Sheffield "held repeated, private conversations with high-ranking Opec representatives assuring them that Pioneer and its Permian basin rivals were working hard to keep oil output artificially low," according to the FTC order. Sheffield, who helped found Pioneer and was its longtime chairman, served as chief executive from 1997 to 2016 and from 2019 through 2023. He remains on the company's board, serving as special adviser to the chief executive since 1 January. The son of an oil executive, Sheffield attended high school in Tehran, Iran. Pioneer shrugged off what it termed a "fundamental misunderstanding" of global oil markets and said that FTC misread "the nature and intent" of Sheffield's actions. Opec declined to comment on FTC's action against Sheffield. FTC is so far the only US regulator to set sights on Opec, even if indirectly. President Joe Biden in 2021 separately tasked FTC with leading an investigation into whether there is price manipulation in gasoline markets. Biden, like many of his predecessors at a time of high gasoline prices, in 2022 accused Opec of uncompetitive behavior in oil markets and expressed support for US legislation allowing antitrust action against the organization by the US Department of Justice. But that acrimony has largely dissipated after global oil and US gasoline prices fell in 2023 from unusually high levels in the previous year. US Congress has not taken significant steps to advance the anti-Opec legislation since 2022. By Haik Gugarats Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Canadian rail workers vote to launch strike: Correction
Canadian rail workers vote to launch strike: Correction
Corrects movement of grain loadings from a year earlier in final paragraph. Washington, 2 May (Argus) — Workers at the two major Canadian railroads could go on strike as soon as 22 May now that members of the Teamsters Canada Rail Conference (TCRC) have authorized a strike, potentially causing widespread disruption to shipments of commodities such as crude, coal and grain. A strike could disrupt rail traffic not only in Canada but also in the US and Mexico because trains would not be able to leave, nor could shipments enter into Canada. This labor action could be far more impactful than recent strikes because it would affect Canadian National (CN) and Canadian Pacific Kansas City (CPKC) at the same time. Union members at Canadian railroads have gone on strike individually in the past, which has left one of the two carriers to continue operating and handle some of their competitor's freight. But TCRC members completed a vote yesterday about whether to initiate a strike action at each carrier. The union represents about 9,300 workers employed at the two railroads. Roughly 98pc of union members that participated voted in favor of a strike beginning as early as 22 May, the union said. The union said talks are at an impasse. "After six months of negotiations with both companies, we are no closer to reaching a settlement than when we first began, TCRC president Paul Boucher said. Boucher warned that "a simultaneous work stoppage at both CN and CPKC would disrupt supply chains on a scale Canada has likely never experienced." He added that the union does not want to provoke a rail crisis and wants to avoid a work stoppage. The union has argued that the railroads' proposals would harm safety practices. It has also sought an improved work-life balance. But CN and CPKC said the union continues to reject their proposals. CPKC "is committed to negotiating in good faith and responding to our employees' desire for higher pay and improved work-life balance, while respecting the best interests of all our railroaders, their families, our customers, and the North American economy." CN said it wants a contract that addresses the work life balance and productivity, benefiting the company and employees. But even when CN "proposed a solution that would not touch duty-rest rules, the union has rejected it," the railroad said. Canadian commodity volume has fallen this year with only rail shipments of chemicals, petroleum and petroleum products, and non-metallic minerals rising, Association of American Railroads (AAR) data show. Volume data includes cars loaded in the US by Canadian carriers. Coal traffic dropped by 11pc during the 17 weeks ended on 27 April compared with a year earlier, AAR data show. Loadings of motor vehicles and parts have fallen by 5.2pc. CN and CPKC grain loadings fell by 4.3pc from a year earlier, while shipment of farm products and food fell by 9.3pc. By Abby Caplan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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