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OPEC and its allies have begun accelerating their tightening of the oil market, with the group's crude oil output shrinking 670,000 b/d in the first month of expanded voluntary cuts in May, according to the latest Platts survey by S&P Global Commodity Insights. This included a drop of 440,000 b/d in OPEC production that totaled 28.16 million b/d in May. Non-OPEC allies' output, led by Russia, fell 230,000 b/d to 13.17 million b/d. From May, several countries introduced voluntary cuts totaling 1.66 million b/d in a bid to halt sliding oil prices. The alliance enshrined June 4 those reductions through the end of 2024, with largest member Saudi Arabia announcing an extra cut of 1 million b/d for at least July.
Russia -- the first country to introduce a voluntary cut effective from April -- saw output drop 150,000 b/d to 9.45 million b/d, the survey showed. This was 410,000 b/d below its February production of 9.86 mil b/d -- used as a baseline for its voluntary cut target of 500,000 b/d. Moscow has said it is ratcheting back production in response to EU sanctions and the G7's price cap targeting Russian crude and refined products. Though crude exports remain elevated, Russian refineries have slashed processing runs by more than 5%, according to market sources.
Saudi Arabia fully implemented its announced 500,000 b/d cut in May, with production averaging 10 million b/d, the survey showed. Besides Saudi Arabia and Russia, other countries pledging voluntary cuts included Iraq, the UAE, Kuwait, Algeria, Kazakhstan, Oman and Gabon.
Iraq was already well below its quota with the prolonged stoppage of northern exports through Turkey due to a lingering financial and political dispute between Baghdad and Ankara. Its output was flat month on month at 4.1 million b/d in May, according to the survey.
UAE production fell 140,000 b/d, followed closely by Kuwait, with a 130,000 b/d drop. The declines were partially offset by a recovery in Nigeria of 220,000 b/d to 1.40 million b/d. In April, Nigerian output was at its lowest level since November 2022 after industrial action from ExxonMobil's in-house workers' union affected output for 10 days mid-month.
Other gainers included Venezuela, which imported more diluent to extract its extra heavy crude, and Iran, which has been exporting more volumes, the survey showed.
Output is set to drop further this summer if countries with voluntary production cuts continue to decrease output, and Saudi Arabia follows through on its additional 1 million b/d cut pledge. Seasonal consumption patterns typically see a rise in global oil demand as the weather warms, while China's halting recovery from the pandemic is forecast by many analysts to gain steam in the second half of the year, so the ongoing OPEC+ supply restraint could tighten the market in the months ahead.
The May reduction means that the gap between OPEC+ output and quotas has ballooned. The 19 members with quotas had a collective compliance rate of 192.39% compared to targets agreed under the agreement. They are producing a collective 3.353 million b/d below quotas, the largest shortfall in the history of the alliance. OPEC+ ministers are not scheduled to convene again until Nov. 26 to review market conditions and adjust quotas as needed, though a nine-country monitoring committee co-chaired by Saudi Arabia and Russia will meet bimonthly.
The Platts survey figures measure wellhead production and are compiled using information from oil industry officials, traders and analysts, as well as reviewing proprietary shipping, satellite and inventory data.
OPEC+ crude oil production:
|OPEC-10 + NON-OPEC||May-23||Change||Apr-23||Quota||over/under|
Unit: million b/d
Source: Platts OPEC+ survey by S&P Global Commodity Insights
Note: Quotas do not include voluntary extra cuts implemented by Saudi Arabia, Russia, Iraq, UAE, Kuwait, Kazakhstan, Algeria, Oman and Gabon