Saudi Arabia discipline pushes OPEC+ crude output to 4-month low in Feb: Platts survey

London — Saudi Arabia made good on its pledge to cut an additional 1 million b/d of its crude production in February, driving total output by OPEC and its Russia-led allies to a four-month low, according to the latest S&P Global Platts survey.

OPEC's 13 members pumped 24.86 million b/d, a decrease of 840,000 b/d from January, while its nine partners added 12.97 million b/d, a rise of 60,000 b/d.

Combined, the so-called OPEC+ alliance produced 37.83 million b/d, its lowest since October, the survey found, putting the group's compliance with its quotas at 113.5%. It was the first month-on-month decline since the bloc began tapering its unprecedented production cuts in July, when the global economy took its first tentative steps in recovering from the worst of the coronavirus pandemic.

Taking away Saudi Arabia's voluntary extra cut would still put OPEC+ compliance at a solid 99.5%, according to Platts calculations.

The kingdom, which is the world's largest exporter of crude, averaged 8.13 million b/d of production in February, down from January's 9.11 million b/d and well below its quota of 9.12 million b/d. Saudi crude exports fell in the month, and state oil giant Aramco also drew heavily from its storage volumes, while refinery maintenance depressed crude runs, the survey found.

The collective OPEC+ production restraint has helped power a robust rally in the oil market, with Platts assessing Dated Brent on March 5 at $69.005/b, its highest since early January 2020.

But despite the price surge, the OPEC+ alliance appears set to keep a tight leash on supply through at least April, warning that the market may not be as strong as it looks, with upcoming seasonal refinery maintenance, still-bloated oil inventories, a largely grounded aviation sector, and continued lockdown measures in many countries.

At its March 4 meeting, the coalition agreed to roll over most quotas for another month, except for a 125,000 b/d rise granted to Russia and a 20,000 b/d increase allowed for Kazakhstan. Saudi Arabia will maintain its voluntary 1 million b/d cut, as well, to continue tightening the market.

Russia falls, Kazakhstan gains

Russia, which has frequently chafed at its OPEC+ cap, failed to take advantage of its looser quota in February, with production declining 70,000 b/d from January to 9.18 million b/d, according to the survey.

Russia curbed its crude exports because of tepid demand from its key customers in Europe, where mobility restrictions and lockdowns persist.

Close ally Kazakhstan, another non-OPEC partner, saw the biggest rise among the group, boosting output by 110,000 b/d to 1.50 million b/d, well in excess of its 1.43 million b/d quota.

Among OPEC members, Iraq had the largest increase, with rising exports pushing its production to 3.89 million b/d, slightly above its quota. The country has been under immense pressure from its OPEC+ counterparts to improve its compliance and institute the compensation cuts it owes for previous excess output, which it says it plans to do by July.

Venezuela, which is exempt from a quota due to severe sanctions levied by the US that have crippled its oil industry, managed a second consecutive month of gains, raising its production to 550,000 b/d, the highest in almost a year. The government has begun using private companies to rehabilitate its wells, particularly in the once prolific Orinoco Belt.

Fellow exempt members Iran and Libya saw their production remain largely flat month-on-month, according to the survey.

Besides Saudi Arabia and Russia, Angola saw the biggest fall, tumbling to 1.12 million b/d in February, the lowest since it joined OPEC in 2007. Severe underinvestment in the West African country's upstream sector has led to dramatic declines, with Angolan production falling 40% in the past five years and rendering its OPEC+ quota mostly meaningless.

The Platts figures are compiled by surveying oil industry officials, traders and analysts, as well as reviewing proprietary shipping, satellite and inventory data.

OPEC+ PRODUCTION (million b/d)

Notes: OPEC and its allies tweaked their production cuts to 7.2 million b/d for January. Russia and Kazakhstan have been permitted small increases for February, March and April, while Saudi Arabia has said it will implement an extra 1 million b/d cut below its quota, for these three months. All other members will continue producing at January levels.

The OPEC+ coalition's next formal meeting is April 1.

The cuts are mostly determined from an October 2018 baseline production level, except for Russia and Saudi Arabia, which were given baselines of 11 million b/d.

OPEC members Iran, Libya and Venezuela are exempt from the deal.

The S&P Global Platts OPEC survey, which has been published since 1988, measures wellhead crude oil production in each member country. In 2020, Platts began estimating production from the non-OPEC members of the OPEC+ alliance.