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Libyan surge, slipping compliance push OPEC+ output up sharply in Dec: Platts survey

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Libyan surge, slipping compliance push OPEC+ output up sharply in Dec: Platts survey

Highlights

OPEC+ output at 7-month high, compliance down to 98.5%

OPEC pumps 25.43 mil b/d, up by 220,000 b/d

Non-OPEC allies increase production by 60,000 b/d

Saudi output 9.01 mil b/d; Russia pumps 9.10 mil b/d

London — OPEC and its allies raised their crude oil production by 280,000 b/d in December to a seven-month high, as Libya pumped its most since mid-2013 and several other countries posted modest increases, the latest S&P Global Platts survey found.

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The rising production came ahead of the OPEC+ coalition's planned 500,000 b/d quota easing for January, in the face of a demand outlook hobbled by soaring COVID-19 cases in many parts of the world.

OPEC's 13 members pumped 25.43 million b/d in December, up 220,000 b/d from November, while their nine non-OPEC partners, led by Russia, produced 12.74 million b/d, an increase of 60,000 b/d.

Combined, the entire coalition's conformity level was 98.5%, down from 100.1% in November, according to Platts calculations.

OPEC+ deal compliance December 2020

Many OPEC+ members, notably Russia and the UAE, have been eager to reclaim market share lost to the pandemic and have lobbied for quotas to be loosened, while Saudi Arabia, Algeria and others have backed more production restraint to prevent oil prices from backsliding if the infections continue to spread.

January's planned increase was a compromise, while for February and March, Russia and Kazakhstan have been permitted further increases to their allocations, while Saudi Arabia has announced it will unilaterally cut 1 million b/d below its quota. All other members will maintain their January levels.

Kingpins headed different ways

Saudi Arabia, OPEC's largest producer and de facto leader, kept its output steady in December at 9.01 million b/d, the survey found, despite tanker tracking services observing a steady rise in its crude exports. Its quota for December was 8.99 million b/d and will rise to 9.12 million b/d from January, not including its extra cut announced for February and March.

Russia, now the largest producer in the OPEC+ group, pushed its crude production to 9.10 million b/d in December, 110,000 b/d above its quota, according to the survey.

Its cap will increase to 9.12 million b/d in January and then 9.18 million b/d in February and 9.25 million b/d in March, under the OPEC+ agreement.

Traditionally, Russia has difficulties increasing production in winter, but the country's domestic oil companies have been preparing for a ramp-up, as it seeks to maintain some of its market share with the world's key oil importers.

Libya rebound

The sharp rise in OPEC output was mainly down to Libya, whose production rose to its highest in six-and-a-half years, the survey found.

Libya pumped 1.18 million b/d last month, up 150,000 b/d from November. The North African producer has managed to add more than 1 million b/d in the last three months after its two warring factions -- the UN-backed Government of National Accord and the self-styled Libyan National Army -- agreed a peace deal.

But wild production swings are still likely in 2021 as the LNA and GNA have still to formulate a comprehensive revenue-sharing agreement, making Libya still prone to supply outages.

Libya, Iran and Venezuela are exempt from quotas under the deal, so the massive wave of Libyan production does not impact the OPEC+ alliance's compliance figure. But it does complicate the group's ability to keep a firm grip on its supply.

Iran, anticipating sanctions relief once US President-elect Joe Biden takes office on Jan. 20, has also begun to produce more, according to the survey. It produced 2.04 million b/d in December, its highest since March.

Venezuela, also sanctions-hit, saw a slight decline and faces more stark prospects than Iran, with its oil infrastructure suffering from years of underinvestment, theft and mismanagement.

Iraq and UAE rise, Nigeria falls

Iraq, in the throes of an economic crisis, increased its output, pumping 3.85 million b/d, 50,000 b/d above its quota, as its southern exports climbed sharply.

The UAE also continued to push output higher in December, but it was still 20,000 b/d below its quota of 2.59 million b/d.

Abu Dhabi National Oil Co. has informed its term customers it will reduce nominations in January for all its four crude grades, with a 20% cut for flagship grade Murban.

Meanwhile, Nigeria posted its highest-ever compliance since the alliance began its output deal in 2017.

This was mainly due to production issues caused by a fire at the Qua Iboe terminal, from which one of Nigeria's main crude grades is exported.

Nigeria produced 1.43 million b/d last month, a fall of 70,000 b/d from November and its lowest level since August 2016.

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 December 2020

Notes: OPEC and its allies have just completed a 7.7 million b/d production cut accord from August to December.

For January, the coalition tweaked its cuts to 7.2 million b/d. In February and March, Russia and Kazakhstan have been permitted small increases, while Saudi Arabia has said it will implement an extra 1 million b/d cut below its quota. All other members will continue producing at January levels.

The OPEC+ coalition's next formal meeting is March 4. A nine-country Joint Ministerial Monitoring Committee will meet Feb. 3.

The cuts are mostly determined from an October 2018 baseline production level, except for Saudi Arabia and Russia, 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.