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OPEC+ oil cut compliance dips in July, ahead of quota easing: Platts survey

Highlights

OPEC+ crude production up 1.10 million b/d

Quotas set to rise by 2 million b/d in August

Ministers encouraged by pick-up in world economy

London — OPEC+ production discipline slipped in July, as Gulf members led by Saudi Arabia ended their voluntary extra output cuts, while some countries that have struggled to adhere to their quotas continued to pump above their caps, the latest S&P Global Platts survey found.

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Quota compliance by the 22-country alliance fell to 96% for the month, from 106% in July, with its collective production increasing by 1.10 million b/d, according to the survey.

OPEC+ output is set to rise even further in August, with the coalition hiking its quotas by about 2 million b/d in anticipation of higher global oil demand, though some of the additional production may be offset by so-called compensation cuts pledged by members that overproduced their quotas in May, June and July.

In particular, Iraq, Nigeria, Angola and Kazakhstan have come under intense scrutiny from their OPEC+ counterparts for their excess output. Iraq has said it will cut an extra 400,000 b/d below its quota in August and September, after missing its target yet again in July, while Angola and Kazakhstan significantly improved their performance in the month.

Nigeria, meanwhile, maintains that some of its production should be categorized as condensate, which is not subject to the quotas.

Ministers from Saudi Arabia, Iraq, the UAE, Kuwait, Oman and Bahrain said in an Aug. 7 statement that they were "encouraged by the recent signs of improvement in the global economy and commend the efforts taken by countries all over the globe to reopen their economies in a safe way."

A key monitoring committee co-chaired by Saudi Arabia and Russia, the two largest OPEC+ members, will meet Aug. 18 to assess compliance and hash out the compensation cuts.

OPEC+ output compliance with quotas - July 2020

Pressure to comply

OPEC's 13 countries produced 23.39 million b/d of crude oil in July, the survey found, up 1.08 million b/d from June. The 10 members with quotas under the OPEC+ accord achieved 94% compliance with their committed production cuts, according to Platts calculations.

Saudi Arabia, OPEC's largest producer, raised its output by 870,000 b/d to 8.45 million b/d, but still remained below its cap of 8.49 million b/d, as the kingdom voluntarily depressed its June volumes to speed the oil market's rebalancing.

Its quota has been boosted to 8.99 million b/d from August through the end of the year, according to the terms of the OPEC+ deal.

Gulf allies the UAE and Kuwait also increased their production in July after their extra cuts in June, the survey found.

Iraq pumped 3.77 million b/d, a 70,000 b/d month-on-month rise, surpassing its quota of 3.59 million b/d. But its July compliance of 83% is a significant improvement on its May performance of about 44%, according to Platts calculations.

Nigeria was also well above its cap in July, producing 1.56 million b/d, the survey found, though the country and OPEC officials say its offshore Agbami grade should be recategorized as condensate.

Field operator Chevron and equity partner Equinor market the grade to refiners as a light, sweet crude. Platts estimates Agbami production at about 160,000 b/d for July. Stripping that out from Nigeria's production would propel the country's quota compliance to 103% from 65%.

Russia pumps more

OPEC's nine external partners in the OPEC+ coalition, led by Russia, added 11.95 million b/d of production, up marginally month on month for a 99% compliance rate, the survey found, not including Mexico, which exited the deal after June.

Russia, the world's largest oil producer, bumped its output to 8.59 million b/d in July, according to the survey, above its quota of 8.49 million b/d. Like Saudi Arabia, Russia's cap has increased to 8.99 million b/d from August.

Kazakhstan lowered its production to just below its quota, the survey found.

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

JULY
JUNE
CHANGE
QUOTA
JULY COMPLIANCE
OPEC-10
Algeria
0.81
0.81
0
0.816
102%
Angola
1.17
1.22
-0.05
1.180
103%
Congo
0.28
0.30
-0.02
0.251
61%
Equatorial Guinea
0.11
0.11
0
0.098
59%
Gabon
0.19
0.21
-0.02
0.144
-7%
Iraq
3.77
3.70
+0.07
3.592
83%
Kuwait
2.16
2.09
+0.07
2.168
101%
Nigeria
1.56
1.58
-0.02
1.412
65%
Saudi Arabia
8.45
7.58
+0.87
8.492
102%
UAE
2.47
2.33
+0.14
2.446
97%
TOTAL OPEC-10
20.97
19.93
+1.04
20.599
94%
OPEC EXEMPT
Iran
1.98
2.00
-0.02
n/a
n/a
Libya
0.11
0.10
+0.01
n/a
n/a
Venezuela
0.33
0.28
+0.05
n/a
n/a
TOTAL OPEC
23.39
22.31
+1.08
n/a
n/a
NON-OPEC
JULY
JUNE
CHANGE
QUOTA
JULY COMPLIANCE
Azerbaijan
0.55
0.55
0
0.554
102%
Bahrain
0.15
0.15
0
0.158
117%
Brunei
0.07
0.08
-0.01
0.079
139%
Kazakhstan
1.31
1.35
-0.04
1.319
102%
Malaysia
0.43
0.44
-0.01
0.459
121%
Oman
0.67
0.68
-0.01
0.682
106%
Russia
8.59
8.50
+0.09
8.492
96%
Sudan
0.05
0.05
0
0.058
147%
South Sudan
0.13
0.13
0
0.100
0%
TOTAL NON-OPEC
11.95
11.93
+0.02
11.901
99%

OPEC-10 + NON-OPEC

32.92
31.86
+1.06
32.500
96%

Unit: million b/d

NOTES:

On June 6, OPEC and its allies agreed to continue their current production cuts through July, except for Mexico, whose participation ended after June. The cuts are scheduled to taper to 7.7 million b/d from August to December, and then down to 5.8 million b/d from 2021 through April 2022.

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

The OPEC+ coalition's next formal meeting is Nov. 30-Dec. 1 in Vienna. A nine-country Joint Ministerial Monitoring Committee will meet online Aug. 18 and monthly thereafter to assess compliance and decide whether to change the level of cuts.

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.