Opec crude output rises on Iranian recovery
Opec crude production rose by 70,000 b/d in April to hit a three-month high of 24.96mn b/d, boosted by rising Iranian output.
Iran overtook Kuwait to become Opec's fourth-largest producer, increasing output by 80,000 b/d to 2.35mn b/d last month, a level not reached since May 2019, according to Argus' latest survey. Tehran has now added 400,000 b/d since October last year.
The rise coincides with ongoing talks aimed at reviving the 2015 Iran nuclear deal and lifting US sanctions on Iranian oil exports. US officials say sanctions relief can be swiftly implemented if an agreement is struck, and some analysts expect a breakthrough in the talks within 6-8 weeks. Iran could raise its oil exports to 2.5mn b/d once the sanctions are removed, according to vice-president Eshaq Jahangiri.
Analysts estimate that Iran currently exports at least 650,000 b/d, much of it to independent Chinese refineries, which dilute it with light sweet crude. These refiners will struggle to clear more Iranian crude through customs until the release of a second batch of 2021 import quotas, forcing current arrivals to back up in storage.
Saudi Arabia delivered the second-largest output hike among Opec producers last month, although it was still just under 1mn b/d below its 9.12mn b/d Opec+ quota. Riyadh is set to unwind the extra 1mn b/d cut by 250,000 b/d in May, a further 350,000 b/d in June and another 400,000 b/d in July. A seasonal increase in crude burn for air conditioning means this rise may not be reflected in exports.
The higher production from Saudi Arabia and Iran offset declines in north and west Africa. Libya shed 50,000 b/d last month after funding issues forced state-owned NOC subsidiary Agoco to shut in production, while Angolan and Nigerian output dropped by a combined 60,000 b/d. Overall Opec+ output — which includes nine non-Opec counties but excludes Opec members Iran, Libya and Venezuela — increased by 260,000 b/d last month but remained below the group's collective April quota of 35.2mn b/d.
The 10 Opec participants in the output restraint deal retained a 125pc compliance rate, but conformity among their non-Opec counterparts declined to 91pc, the lowest since May 2020. Leading non-Opec producer Russia once again exceeded its quota amid a surge in exports. Seaborne Urals shipments jumped to 1.4mn b/d in April from 1.16mn b/d in March, according to Vortexa data. Russia had already accrued the equivalent of around 26mn bl of overproduction between May last year and March this year, an internal Opec document shows.
After freezing most quotas in recent months, the Opec+ coalition will raise its collective ceiling by 350,000 b/d in May, another 350,000 b/d in June and 441,000 b/d in July — although the group has reserved the option to reverse course should market conditions warrant it. The additional supply will come at a time of muted demand in India, which is struggling to contain a rapid surge in Covid-19 cases. India accounted for just under half of all new cases worldwide last week, according to the World Health Organisation.
| Opec+ wellhead production | mn b/d | |||
| April | March* | April target | Compliance (%) | |
| Opec 10† | 20.99 | 20.97 | 22.12 | 125 |
| Non-Opec | 13.30 | 13.07 | 13.08 | 91 |
| Total | 34.29 | 34.03 | 35.20 | 113 |
| Opec | ||||
| Saudi Arabia | 8.13 | 8.08 | 9.12 | 153 |
| Iraq | 3.92 | 3.93 | 3.86 | 92 |
| Kuwait | 2.33 | 2.33 | 2.33 | 100 |
| UAE | 2.62 | 2.61 | 2.63 | 101 |
| Algeria | 0.86 | 0.86 | 0.88 | 109 |
| Nigeria | 1.45 | 1.47 | 1.52 | 121 |
| Angola | 1.12 | 1.16 | 1.27 | 156 |
| Congo (Brazzaville) | 0.27 | 0.27 | 0.27 | 107 |
| Gabon | 0.19 | 0.17 | 0.16 | 6 |
| Equatorial Guinea | 0.11 | 0.09 | 0.11 | 100 |
| Opec 10† | 20.99 | 20.97 | 22.12 | 125 |
| Iran | 2.35 | 2.27 | na | na |
| Libya | 1.14 | 1.19 | na | na |
| Venezuela | 0.48 | 0.46 | na | na |
| Total Opec 13 | 24.96 | 24.89 | na | na |
| Non-Opec | ||||
| Russia | 9.52 | 9.33 | 9.38 | 91 |
| Oman | 0.73 | 0.73 | 0.73 | 101 |
| Azerbaijan | 0.59 | 0.59 | 0.60 | 105 |
| Kazakhstan | 1.52 | 1.50 | 1.46 | 76 |
| Malaysia | 0.46 | 0.44 | 0.49 | 128 |
| Bahrain | 0.17 | 0.17 | 0.17 | 100 |
| Brunei | 0.09 | 0.08 | 0.09 | 93 |
| Sudan | 0.06 | 0.06 | 0.06 | 138 |
| South Sudan | 0.16 | 0.16 | 0.11 | -155 |
| Total non-Opec | 13.30 | 13.07 | 13.08 | 91 |
| *revised numbers | ||||
| † Iran, Libya and Venezuela are exempt from the agreement | ||||
Related news posts
Service firms talk up long-term gas prospects
Service firms talk up long-term gas prospects
New York, 29 April (Argus) — Leading oil field service firms are bullish on the outlook for natural gas demand in coming years even though the fuel remains stuck in the doldrums for now, with US prices near pandemic lows amid oversupply after a mild winter. "This is the age of gas," Baker Hughes chief executive Lorenzo Simonelli says, adding that global demand for the power plant and heating fuel is due to climb by almost 20pc through 2040. "Gas is abundant, lower emission, low cost, and the speed to scale is unrivalled," he says. Halliburton also sees natural gas as the "next big leg of growth" in North America, driven by demand for LNG expansion projects, although its current plans do not envisage any comeback this year. Given a shrinking fracking fleet and lack of new equipment being built, the stage is set for an "incredibly tight market" in future, chief executive Jeff Miller says. A recovery in natural gas activity in the US may not happen until the end of this year or even 2025, Liberty Energy chief executive Chris Wright says. "Customers need to see that prices have firmed, that export volume demand actually is pulling upward at a meaningful rate," he says. On recent first-quarter earnings calls, service firms were upbeat about international growth prospects in the face of escalating geopolitical tensions in the Middle East. The backdrop remains one of growing demand for oil and gas and an "even deeper focus" on energy security, according to Olivier Le Peuch, chief executive of SLB, the world's biggest oil field service company. SLB, formerly known as Schlumberger, expects overseas growth momentum to make up for a slowdown in North America this year. "The relevance of oil and gas in the energy mix continues to support further investments in capacity expansion, particularly in the Middle East and in long-cycle projects across global offshore markets," Le Peuch says. But results in North America will be depressed by the combination of low gas prices, capital discipline and producer consolidation. International rescue Halliburton expects international revenue growth in the "low double-digits" for the full year, with some margin expansion given the tight market for equipment and labour. Steady activity levels are seen in North America after land completion activity bottomed out in the fourth quarter of 2023 and rebounded in the first quarter. "The world requires more energy, not less, and I'm more convinced than ever that oil and gas will fill a critical role in the global energy mix for decades to come," Miller says. The positive outlook is reinforced by customers' multi-year activity plans across markets and assets. Baker Hughes forecasts "high single-digit growth" when it comes to the outlook for international drilling and completion spending this year. But customer spending in North America is expected to fall in a "low to mid-single-digit range" when compared with 2023. "We continue to anticipate declining activity in the US gas basins, partially offsetting modest improvement in oil activity during the second half of the year," Simonelli says. Beyond 2024, upstream spending is seen growing further across international markets, albeit at a "more moderate" pace than seen in recent years, according to Baker Hughes. SLB paced a decline among oil service stocks at the end of January when state-controlled Saudi Aramco scrapped plans to increase crude output capacity to 13mn b/d from 12mn b/d. But Saudi Arabia has stepped up its plans to boost gas output, by 60pc by 2030. This new energy mix was not anticipated six months ago, but it will "not have a natural impact on our ambition for growth" in Saudi Arabia, Le Peuch says. And Saudi gas plans will require substantial investment in gas infrastructure, which is a "long-term net positive" for Baker Hughes, Simonelli says. By Stephen Cunningham Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Production, patience driving Canada’s oil sands profits
Production, patience driving Canada’s oil sands profits
Calgary, 29 April (Argus) — Canadian oil sands operators enjoying firm profits on strong production are getting ready for a major boost when a new export pipeline to the Pacific coast goes into commercial service this week. The federally owned 590,000 b/d Trans Mountain Expansion (TMX) remains on track to start operations on 1 May, and the line has already started to bear fruit. More than 4mn bl of Canadian crude is being pushed into the C$34bn ($25bn) expansion for linefill, helping to work down inventory levels in Alberta while lifting local prices relative to international benchmarks, as intended. The largest four oil sands companies — Canadian Natural Resources (CNRL), Cenovus, Suncor, and Imperial Oil — are all shippers on the expansion. They closed 2023 with a new production record of 3.6mn b/d of oil equivalent (boe/d) combined in the fourth quarter, and are targeting further increases as they plan to fill the new pipeline. About 80pc of their output comes from their core oil sands businesses, with the balance from natural gas and offshore projects. The higher output compensated for a slight dip in prices, helping to push profits higher. First-quarter 2024 results are likely to be a similar story, but it is the second quarter when producers look ready to shine as prices climb to multi-month highs. A combined profit of C$26bn in 2023 was a stellar result for the big four oil sands operators, despite a 25pc decline from the record C$34bn set the previous year. Their massive projects are agnostic to daily price swings, instead focused on uptime, long-term fundamentals and capitalising on key step-changes such as the one TMX presents. Patience in the oil sands is key. TMX will cater largely to heavy crude producers, which saw diluted bitumen prices in Alberta rise only slightly quarter on quarter to $58/bl in the first quarter. But climbing global benchmarks in April and a shrinking heavy sour discount with the help of TMX linefill now has the outright price for the crude approaching $70/bl. This is above guidance given in 2024 corporate budgets, and far above oil sands operating costs that for some are as low as $12/bl. The TMX factor TMX will nearly triple the existing 300,000 b/d Trans Mountain system that connects oil-rich Alberta to the docks in Burnaby, British Columbia. The expansion was first conceived more than a decade ago with the intention of being operational by late-2017, but cost overruns and repeated delays put the project in jeopardy. Canadian producers that sought growth during that period of frustration are poised to take advantage of this new era of excess export capacity. CNRL, Cenovus and Suncor have been significant buyers in the oil sands in recent years, doubling down on the world's third-largest deposit of oil while many international companies fled amid regulatory uncertainty. The government itself enabled a foreign operator to leave Canada, buying the Trans Mountain system from Kinder Morgan in 2018. But as Prime Minister Justin Trudeau's Liberal party sees TMX to completion, and then the line's planned sale, it is also readying legislation towards something more on-brand for climate-concerned Ottawa: carbon capture. A carbon capture and storage (CCS) project spearheaded by Pathways Alliance — a consortium of the six largest oil sands producers — is awaiting federal and provincial help to push their proposal forward. Federal incentives are soon to become law, the Trudeau government said this month, with the expectation that tax credits will advance the massive C$16.5bn project and start to offset oil sands greenhouse gas emissions to meet net zero pledges for all parties involved. TMX represents a new era for Canadian crude producers, but so too does CCS, as it could attract even more investment into Alberta's oil sands region. By Brett Holmes Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
S Korea’s SK Innovation sees firm 2Q refining margins
S Korea’s SK Innovation sees firm 2Q refining margins
Singapore, 29 April (Argus) — South Korean refiner SK Innovation expects refining margins to remain elevated in this year's second quarter because of continuing firm demand, after achieving higher operating profits in the first quarter. SK expects demand to remain solid in the second quarter given a strong real economy, expectations of higher demand in emerging markets and continuing low official selling price (OSP) levels. This is despite the US Federal Reserve's high interest rate policy and oil price rallies, which are weighing on crude demand. The company's sales revenue dropped to 18.9 trillion won ($13.7bn) in the first quarter, down by 3.5pc on the previous quarter. Its energy and chemical sales accounted for 91pc of total revenue, while battery and material sales accounted for the remaining 9pc. But SK's operating profit increased to W624.7bn in January-March from W72.6bn the previous quarter. This came as its refining business flipped from an operating loss of W165bn in October-December to an operating profit of W591.1bn in the first quarter. SK attributed this increase to elevated refining margins because of higher oil prices, as well as Opec+ production cut agreements and OSP reductions. First-quarter gasoline refining margins almost doubled on the previous quarter from $7.60/bl to $13.30/bl, although diesel and kerosine edged down to $23.10/bl and $21.10/bl respectively. SK Innovation's 840,000 b/d Ulsan refinery operated at 85pc of its capacity in the fourth quarter, steady from 85pc in the previous quarter but higher than 82pc for all of 2023. The refiner's 275,000 b/d Incheon refinery's operating rate was at 88pc, up from 84pc in the fourth quarter and from 82pc in 2023. SK plans to carry out turnarounds at its 240,000 b/d No.4 crude distillation unit and No.1 residual hydrodesulphuriser, both at Ulsan, in the second quarter. Its No.2 paraxylene unit in Ulsan will have a turnaround in the same quarter. By Tng Yong Li Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Singapore’s Jadestone cuts 2024 output guidance
Singapore’s Jadestone cuts 2024 output guidance
Sydney, 29 April (Argus) — Singapore-listed independent Jadestone Energy has cut its 2024 oil and gas production guidance, citing disappointing first-quarter group production. Jadestone said the impact of planned and unplanned downtime across its portfolio resulted in it narrowing its guidance from 20,000-23,000 bl of oil equivalent (boe/d) to 20,000-22,000 boe/d in its results for 2023 published on 29 April. Average production for January-March was 17,200 boe/d, which Jadestone said reflected the impact on its Australian assets, including the 6,000 b/d Montara oil field, of an active cyclone season at the start of 2024. The firm produced 14,000 b/d in 2023, up from 11,500 b/d in 2022. But problems at Montara and lower realised oil prices resulted in a loss of $91mn in 2023 following a $9mn profit recorded in 2023. Jadestone's realised oil price of $87.34/boe in 2023 was 16pc lower than $103.85/boe a year earlier. Proved and probable reserves at the end of 2023 totalled 68mn boe, a 5pc increase on a year's earlier 64.8mn boe, mainly because of the acquisition of a 9.52pc stake in Thailand's Sinphuhorm gas field and increases at the Cossack, Wanaea, Lambert and Hermes oil fields offshore Australia and the Akatara gas field in Indonesia's Sumatra. By Tom Major Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Business intelligence reports
Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.
Learn more