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Gulf OPEC states get head start in market share war as crude output surges in March: Platts survey

Highlights

OPEC production rises 980,000 b/d to 28.97 mil b/d

Quota compliance collapses to 13% in last month of deal

Saudi output jumps to 14-month high of 10.15 mil b/d

London — OPEC's core Gulf countries of Saudi Arabia, the UAE and Kuwait appear to have wasted no time in ramping up their crude production after the breakdown of talks with Russia over a new supply accord last month.

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The three countries contributed to OPEC pumping a three-month high of 28.97 million b/d in March, with several members busting their production quotas, even though they weren't set to expire until the end of the month, an S&P Global Platts survey found.

Compliance among the 10 OPEC countries with quotas collapsed to 13% from 120% in February, according to Platts calculations.

The failure of OPEC and its allies to reach an agreement over a new round of production cuts sparked a market share battle that has exacerbated an oil market swoon caused by the coronavirus pandemic.

OPEC compliance - March 2020

OPEC kingpin Saudi Arabia, which said it planned to pump at its maximum capacity of 12 million b/d starting in April, boosted its production to 10.15 million b/d in March, just above its quota of 10.144 million b/d, the survey found.

Its crude exports were up significantly, hitting close to 9 million b/d in the last week of the month, according to provisional data from Platts trade flow software cFlow, and the kingdom also boosted its inventories.

Close ally the UAE aggressively pushed its crude output to 3.45 million b/d, blowing past its cap of 3.012 million b/d, while Kuwait pumped 2.90 million b/d, well above its quota of 2.669 million b/d.

Those gains were more than enough to offset continued declines in sanctions-hit Iran and Venezuela, as well as conflict-ridden Libya.

Overall, OPEC's March production was a 980,000 b/d jump from February, the survey found.

OPEC, Russia and nine other partners in the coalition known as OPEC+ are now back at the negotiating table, hoping to not only salvage a deal on output cuts but also widen it to other major producing countries, including the US, Canada, Brazil and Norway, as the coronavirus pandemic continues to eat away at global oil demand. Oil prices have fallen 70% since the failed March 6 meeting.

OPEC+ ministers are scheduled to meet Thursday via a webinar, with an emergency summit of G20 energy ministers tentatively set for Friday.

Any new cuts likely would not affect April supply, Platts Analytics noted. "But [a deal] would slow down stock builds, potentially soften freight rates and accelerate the inflection point towards stock draws," it said in a recent note.

Sharp output falls in exempt members

The three members exempt from quotas under the now-expired deal -- Iran, Libya and Venezuela -- saw their production fall by a combined 270,000 b/d from February, the survey found.

Libya's oil production plunged to 90,000 b/d, the lowest level since September 2011, when the North African country was reeling from a civil war that led to the demise of its leader, Colonel Moammar Qadhafi.

Output has slumped by more than a 1 million b/d since the self-styled Libyan National Army imposed a blockade on the country's five export terminals in mid-January.

Iranian crude production slumped to 2.07 million b/d in March, as crude exports and refinery runs fell, with the double whammy of the coronavirus pandemic and US sanctions weighing on the oil sector.

This is the lowest level Iran has produced since April 1988, Platts data showed.

Venezuela's crude production fell to 650,000 b/d in March, reversing its recent trend that had seen it rise and then stabilize.

Recent US sanctions against companies, which had provided critical financing to Venezuela's oil sector, have resulted in the closing of high cost wells, affecting production, survey panelists noted.

Venezuelan state-owned PDVSA is struggling to keep oil flowing in the country's main oil fields in the face of high inventories, crippled refineries, equipment theft and worker absenteeism.

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

OPEC PRODUCTION (IN MILLION B/D)

COUNTRY
MAR
CHANGE
FEB
Algeria
1.03
0.03
1.00
Angola
1.40
0.03
1.37
Congo-Brazzaville
0.32
0.00
0.32
Equatorial Guinea
0.13
0.00
0.13
Gabon
0.21
0.02
0.19
Iran
2.07
-0.05
2.12
Iraq
4.65
0.00
4.65
Kuwait
2.90
0.23
2.67
Libya
0.09
-0.05
0.14
Nigeria
1.92
0.04
1.88
Saudi Arabia
10.15
0.46
9.69
UAE
3.45
0.44
3.01
Venezuela
0.65
-0.17
0.82
Total
28.97
0.98
27.99

OPEC PRODUCTION VS ALLOCATIONS (IN MILLION B/D)

COUNTRY
MAR
ALLOCATION
OVER/UNDER
Algeria
1.03
1.01
0.02
Angola
1.40
1.48
-0.08
Congo-Brazzaville
0.32
0.31
0.01
Equatorial Guinea
0.13
0.12
0.01
Gabon
0.21
0.18
0.03
Iran
2.07
EXEMPT
N/A
Iraq
4.65
4.46
0.19
Kuwait
2.90
2.67
0.23
Libya
0.09
EXEMPT
N/A
Nigeria
1.92
1.75
0.17
Saudi Arabia
10.15
10.14
0.01
UAE
3.45
3.01
0.44
Venezuela
0.65
EXEMPT
N/A
Total OPEC-10
26.16
25.15
1.01

Notes: On March 6, OPEC and its allies failed to agree on a production deal to combat the impact of the coronavirus on global oil demand.

The coalition is hoping to salvage this by coordinating new output cuts with the help of other oil producers such as the US, Canada and the US. A webinar meeting is scheduled for April 9.

Ecuador exited the group effective January 1.

S&P Global Platts OPEC survey, which has been published since 1988, measures wellhead crude oil production in each member country.