Opec+ output down as producers deliver cuts

Opec+ production fell as members that pledged extra cuts in April made nearly all of the promised reductions

Opec+ output fell to a 19-month low in May as Russian refinery maintenance curbed production and other members implemented most additional cuts.

Production by Opec+ members with targets was 820,000 b/d lower in May. Output by Opec members fell by 440,000 b/d and supply by non-Opec members was 380,000 b/d lower, Argus estimates (see table).

The largest reductions were made by the eight Opec+ members that agreed to additional cuts of nearly 1.16mn b/d starting in May in a surprise move announced in April. They include Saudi Arabia, Iraq, Kuwait, UAE, Algeria, Gabon, Oman and Kazakhstan. Together they cut their output by close to 1.08mn b/d in May relative to their targets, falling 80,000 b/d short of the extra cuts pledge.

Opec members of the group were responsible for 1.04mn b/d of the additional planned cuts and they implemented 990,000 b/d of that reduction last month. Gabon and the UAE fell short by just over 20,000 b/d. Kazakh output fell rapidly below its quota around 20 May, leaving output 50,000 b/d lower for the month. It remained around 1.5mn b/d in the first week of June, but showed signs of recovery immediately after. Oman also cut output by 40,000 b/d in May.

Iraq came in under its new implied ceiling of 4.22mn b/d amid the ongoing shut-in of production from the semi-autonomous Kurdistan region in northern Iraq. The outlook for a resumption of crude exports from northern Iraq via Turkey has dimmed following a worsening of relations between Iraq's federal government and authorities in the Kurdish region, relating to control over the Kurdistan Regional Government's exports and oil revenue.

Production rose in Nigeria and Angola in May. Nigerian production rebounded as output of Bonny Light and Forcados recovered following earlier disruption. ExxonMobil lifted force majeure on exports of four of its Nigerian grades in late April following successful negotiations to end strikes.

Maintenance begins

Russian production fell by nearly 300,000 b/d from April levels, despite a slight increase in crude exports, mostly from Baltic ports. Deliveries to domestic refineries fell by 280,000 b/d as refiners cut runs for maintenance. An 80,000 b/d drop in crude stocks balanced out the export increase. There is still scepticism in the market over Russia's additional 500,000 b/d production cut. It was originally intended to come into effect in March. Discrepancies have emerged between what Russia had announced and figures reported by secondary sources. This may have prompted Russian deputy prime minister Alexander Novak last month to dismiss what he called "unfounded speculation in the press" that Russia was failing to implement its cut. Novak later said that Russia's cut was "achieved from May".

Opec producers exempt from targets have been staging a recovery in production. Iranian output rose to its highest level in over four years after a surge in exports amid strong demand from its primary buyer China and after the commissioning of a new crude unit at its Abadan refinery in March. Iran's oil minister Javad Owji said on 17 May that the country's crude production is above 3mn b/d, the highest since it fell under US sanctions in 2018.

Venezuelan production is rebounding after an easing of US sanctions that allows state-owned oil firm PdV's joint-venture partner Chevron to export crude. Venezuela says the country is producing more than 800,000 b/d and plans to reach 1mn b/d by August, but many observers call those figures unrealistic, given the general disrepair of Venezuela's energy infrastructure.

Libyan production has also been mostly disruption-free, allowing a recovery to closer to 1.2mn b/d last month.