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Voluntary cuts push Opec June output to record low

  • Spanish Market: Crude oil
  • 09/07/20

Opec production was the lowest on record in June, when three Mideast Gulf countries made additional voluntary cuts and others improved their output restraint.

Overall group output fell by 1.82mn b/d from May to 22.28mn b/d in June, the most depleted level since Argus began keeping records in January 1998.

The decline came as Saudi Arabia, the UAE and Kuwait pledged combined extra cuts that took their respective ceilings under the Opec+ deal down to 7.49mn b/d, 2.35mn b/d and 2.09mn b/d for the month. This commitment prompted Saudi Arabia and Kuwait to interrupt production at the recently restarted offshore 300,000 b/d Khafji field in the shared Neutral Zone throughout June.

Saudi Arabia cut crude output by 930,000 b/d from May to 7.57mn b/d, its lowest since July 2002. Sales reflected the decline, as exports fell by 683,000 b/d to 5.6mn b/d, with 20-30pc cuts to nominations of some Asia-Pacific clients. Analysts said some of the June exports came from storage.

The three Mideast Gulf producers will not replicate their voluntary cuts in July. Otherwise, the broader Opec+ group has extended its June cuts into this month. Using a largely October 2018 baseline, the 23-nation coalition aimed to reduce output by 9.7mn over May-June, and targets a 9.6mn b/d cut this month, with the slight change because non-Opec Mexico will no longer contribute.

The extension has come with a Saudi-led focus on individual countries' compliance. The Opec+ Joint Ministerial Monitoring Committee (JMMC), which will meet monthly to discuss conformity, found that Opec+ respected just 87pc of their May pledges and that historical Opec over-producers Iraq and Nigeria again struggled to curb their output.

"We have no room whatsoever for lack of conformity," Saudi oil minister Prince Abdulaziz bin Salman said on 8 June. "We have no stomach for any types of laxities in terms of self-imposed obligations that need to be attended to." Laggards were pushed to submit production plans detailing how they will compensate for excess May output in the June-September period.

Production in Iraq and Nigeria fell sharply in June, although both still missed their targets. Iraqi output dropped by 350,000 b/d to its lowest since April 2015, and Nigerian production was the lowest since August 2016.

Baghdad's new oil minister Ihsan Ismael has instructed caps on federal exports, and state-owned marketing firm Somo asked some buyers to forego already contracted June volumes. Nigerian state-owned NNPC's managing director Mele Kyari expects to reach full compliance with its 1.41mn b/d production quota by the middle of this month, although export loading schedules for August show a level above Nigeria's output limit.

Angola, where underinvestment and mature fields have limited production in the past, was just 71pc compliant in May and was asked to compensate. It improved adherence in June, when a 15-year production low of 1.15mn b/d made it 109pc compliant.

Venezuela contributed to the Opec June output drop, although it is excluded from the Opec+ deal. Internal production reports from state-owned PdV showed declines accelerating to as little as 300,000-350,000 b/d in mid-June because of storage and export constraints caused by US sanctions.

Opec wellhead productionmn b/d
JuneMayJune targetCompliance %
Saudi Arabia7.578.508.49137
Iraq3.754.103.5985
Kuwait2.052.232.17118
UAE2.312.482.45119
Algeria0.800.810.82107
Nigeria1.541.581.4169
Angola1.151.281.18109
Congo (Brazzaville)0.300.280.2534
Gabon0.210.190.14-53
Equatorial Guinea0.130.090.10-10
Opec 1019.8121.5420.60113
Iran1.981.93*nana
Libya0.090.08nana
Venezuela0.400.55nana
Total Opec 13Ϯ22.2824.10nana
*revised
ϮIran, Libya and Venezuela are exempt from production targets

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06/11/24

Cop 29 finance talks need leadership after Trump win

Cop 29 finance talks need leadership after Trump win

Edinburgh, 6 November (Argus) — Donald Trump's US presidential election victory will likely affect finance negotiations during the UN Cop 29 climate summit starting next week, but the US can still play a role while other developed countries step up to the plate, according to observers. Key negotiations at Cop on a new finance goal for developing nations, the so-called NCQG, could be "severely undermined" by Trump's victory, as the prospect of Washington withdrawing from the Paris Agreement may discourage other countries from engaging with US officials, non-profit IISD's policy adviser Natalie Jones told Argus . Trump pulled the US out of the Paris Agreement during his last term in office, calling it "horrendously unfair", and he has signalled he will do so again. "This could potentially weaken ambitions" at Cop 29, but it is unlikely to derail negotiations, Jones said. Observers agree that the US can still play a role in talks on the new finance goal, a key topic at this year's summit. Parties to the Paris deal will seek to agree on a new finance goal for developing nations, following on from the current $100bn/yr target, which is broadly recognised as inadequate. "The Biden administration still has a critical window to support vulnerable nations' calls to mobilise climate finance and deliver a strong climate target," civil society organisation Oil Change International's US campaign manager Collin Rees told Argus . The Biden administration's delegation, which will still take part in Cop 29, will not change position at this stage, according to Jones. And the US could continue to show some leadership, she said, adding that Washington likely intends to release its 2035 Nationally Determined Contribution (NDC) early. Countries' new climate plans must be submitted to the UN climate body the UNFCCC by February 2025, but the US could release its NDC at Cop 29 before Trump takes power early next year, she said. "President Biden must do everything he can in the final weeks of his term to protect our climate and communities," including on fossil fuels, Rees said. The prospect of Trump pulling the US out of the Paris accord could cause initial anxiety at Cop 29, Climate Action Network executive director Tasneem Essop said. But "the world's majority recognises that climate action does not hinge on who is in power in the US". "As we saw before and will see again, other countries will step up if the US reneges on their responsibilities and stands back," Essop said. Trump's victory might also present the EU with an opportunity to strengthen its leadership among other developed countries, according to Jones. "It is really on the EU and other countries to step up now," she said. This is a view echoed by German Green lawmaker Michael Bloss, a member of the European Parliament's delegation at Cop 29. "Europe needs to become the adult in the room," Bloss told Argus . The EU cannot rely on the US anymore and must become a global climate leader to ensure success at Cop 29, he said. Meanwhile, Oil Change's Rees stressed that the NCQG is a collective goal. "Other major economies must now step forward to fill the gaps, much as they would have needed to in any scenario given how the US has long refused to pay its fair share," he said. By Caroline Varin and Dafydd ab Iago Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Iraq proposes doubling payment for KRG crude


06/11/24
06/11/24

Iraq proposes doubling payment for KRG crude

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Trump nears victory in US election: Update 3


06/11/24
06/11/24

Trump nears victory in US election: Update 3

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Trump takes early lead in swing states: Update 2


06/11/24
06/11/24

Trump takes early lead in swing states: Update 2

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US elections undecided as some polls close: Update


06/11/24
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