Opec+ March output sees first fall in 13 months

Production from Opec+ deal participants fell in March for the first time in 13 months, with international sanctions and buyers' reluctance to take crude from Russia beginning to bite into output from the non-Opec leader.

Deal participants' production fell by 190,000 b/d to 38.06mn b/d in March, 1.48mn b/d below the month's target according to Argus' survey. This is the first production retreat since February 2021, when output receded by 770,000 b/d because of an additional 1mn b/d cut implemented by Saudi Arabia.

Most of the March drop was concentrated in Nigeria, Kazakhstan and Russia, although 15 of the 19 Opec+ participants produced below their targets. UAE energy minister Suhail al-Mazrouei in late March called for higher oil and gas investment to counter uncertainty over future supply.

"Every country is facing a reduction [in capacity]… natural decline, and we have seen it," he said. "In the Opec+ group alone, we lost 1mn b/d over the year. And God knows this year how many more barrels we will lose."

Russian output declined for the first month in more than a year, signalling international isolation is taking a toll. Its output dropped by 50,000 b/d in the first full month of its war with Ukraine, leaving it 330,000 b/d under its 10.33mn b/d target — a quota that exceeds Russia's 10.3mn b/d capacity, as assessed by Argus. Production this month could fall by 4-5pc from March, deputy prime minister Alexander Novak said yesterday.

Formal and informal sanctions are yet to depress Russian crude exports, although US restrictions have removed a major outlet for the country's upgradeable residues, pushing domestic runs down by 500,000 b/d and freeing 120,000 b/d of additional crude for export last month. The medium sour Urals grade accounted for most increases, as term buyers honoured pre-agreed contracts, and Indian refiners stepped in to procure heavily discounted spot supply.

"If there [is] fuel available and available at a discount, why shouldn't I buy it? I need it for my people," Indian finance minister Nirmala Sitharaman said last week, signalling India could buy more Russian crude. Chinese refiners appear to be buying ESPO Blend and could continue to do so, even though demand has been choked by measures to tackle resurging Covid-19 infections.

Output fell from the non-Opec group's second largest producer, Kazakhstan, because storm damage to two of three single point mooring (SPM) buoys at the CPC export terminal forced a late-March shutdown at the Tengiz field. The CPC consortium forecasts the terminal could fully resume loadings within three-to-four weeks of the SPM incident.

Opec heavyweight Saudi Arabia's production was flat in March, when Yemen's Houthi rebels launched missile attacks at facilities operated by state-controlled Aramco causing a drop in throughput at the 400,000 b/d Yasref refinery. Riyadh said it will not incur any consequent "responsibility for any shortage in oil supplies to global markets" arising from the attacks. Some analysts flagged sharp Saudi export declines, which top 400,000 b/d according to preliminary Argus tracking.

Nigerian production fell the most among Opec producers, dropping by 100,000 b/d to put it 310,000 b/d under its quota. Italian integrated Eni declared and lifted force majeure on Brass River crude because of a pipeline explosion, and Shell put similar restrictions on the Bonny Light terminal that it has yet to lift. Pipeline vandalism and sabotage have stymied Nigerian output since the second half of last year, with Abuja's compliance averaging 227pc since July.

Production trends diverged among the deal-exempt members. Libyan output fell by 70,000 b/d after a valve closure drove an early-March shutdown at the 300,000 b/d El Sharara and 90,000 b/d El Feel fields. Iranian production rose by 30,000 b/d, with domestic consumption increasing ahead of the Nowruz holiday period. Exports picked up to 930,000–1mn b/d, according to analysts and tracking.

By Ruxandra Iordache