Opec+ crude output rises despite Russia sanctions

Opec+ crude production rose in December on the back of a rebound in Nigerian output and steady Russian production despite the imposition of sanctions.

The EU ban on seaborne imports of Russian crude and the G7-led price cap on Russian oil sales took effect on 5 December but appear to have had little impact on Russian production last month, which was almost unchanged on November. Russian crude exports fell sharply but are rebounding in January, making it unlikely that production has been shut in. Russian oil companies have been able to finalise crude supply contracts for February, although some buyers have been demanding compliance with the price cap scheme, Russia's deputy prime minister, Alexander Novak, said on 11 January. Russian oil firms were ordered not to comply with the terms of the price cap in contracts for December-February, Novak said.

Opec+ members with quotas produced a combined 38.31mn b/d in December, up by 80,000 b/d on the month, Argus estimates (see table). But the total was still 1.79mn b/d short of the group's collective target for last month. Opec production increased by more than 100,000 b/d compared with November, following a rise in Nigerian output after months of disruption. The 140,000 b/d jump in Nigerian production was partly offset by lower output from Kuwait.

Nigeria was still 390,000 b/d short of its Opec+ quota last month despite the increase in its production. But the difference between pledged and actual output was well down on the 780,000 b/d deficit in September. Abuja has not met its Opec+ quota for at least two years, hampered by infrastructure problems and the long-running issues of sabotage and oil theft. The government says it is stepping up efforts to improve security.

The December increase included a rise in Bonny Light production. The Shell-operated Bonny terminal was put under force majeure in mid-March last year before resuming "a limited export programme" in November. This was partly offset by maintenance affecting Agbami output.

Target practice

Most major Mideast Gulf producers — including Saudi Arabia, Iraq and the UAE — kept their output largely steady on the month, producing close to their quotas. Iraq looks to be limiting refinery runs rather than lowering exports. Crude supplied to domestic refineries has been falling since October, according to Iraqi oil marketer Somo. The drop in Iraqi refining runs in December was also attributed to the shutdown of the 70,000 b/d Salahuddin 1 plant, part of the 300,000 b/d Baiji complex, for scheduled maintenance.

Opec+ at its most recent ministerial meeting in December pledged to roll over the nominal 2mn b/d cut to production targets that ministers agreed at their meeting in October. The reduction is expected to last until the end of 2023.

Ministers are not scheduled to meet again until 4 June, but the group's Joint Ministerial Monitoring Committee is planned to convene on 1 February to discuss the market and evaluate whether any policy change is needed. New Opec president Gabriel Mbaga Obiang Lima says the group would be wise to wait until there is more clarity on the market outlook before amending production targets. Chinese demand and the fallout from the war in Ukraine are "clearly the two key issues that everyone is monitoring most closely", but the prospect of a widespread recession is also on Opec's radar, Obiang Lima says.

"We are going into 2023 with a lot of countries going into recession," he says. "Countries will need to re-evaluate their budgets and re-evaluate their economies."

By Denise Albrighton