…As Nigeria, others reject US appeal to raise oil supply
By Uthman Salami
Though the increase in OPEC’s oil output in October fell short of the rise planned under a deal with allies, the Organization of the Petroleum Exporting Countries (OPEC) pumped 27.50 million barrels per day (bpd) in October.
According to a survey by Reuters, a rise of 190,000 bpd from the previous month but below the 254,000 increase permitted under the new supply deal.
This is as a result of involuntary outages in some some countries that offset higher supplies from Saudi Arabia and Iraq.
OPEC and allies are suspending output cuts made in 2020 as demand recovers from the coronavirus pandemic, although some members are not delivering the full boosts promised due to a lack of capacity.
At the same time, the organization is cautious of pumping too much oil in case of renewed setbacks in the battle against COVID-19.
“OPEC+ will likely stay behind the demand curve, rather than risk jumping ahead and getting burned,” said Rystad Energy analyst Louise Dickson.
The cut in supply had helped support oil prices, which are trading near $85 a barrel and close to a three-year high, prompting the United States and other consumers to urge producers to supply more crude.
This OPEC deal allowed for a 400,000 bpd production increase in October from all members, of which about 254,000 bpd is shared by the 10 OPEC members covered by the deal, OPEC figures show.
With output undershooting the planned increase last month, OPEC’s compliance with its pledged cuts increased to 118% in October the survey found, from 114% a month earlier.
OPEC+ meets on Thursday to review its policy and is expected to reconfirm its plans for monthly increases.
The biggest rises in October came from OPEC’s top two producers, Saudi Arabia and Iraq, which both boosted output largely as promised according to the agreement.
Kuwait, the United Arab Emirates and Algeria also made increases as called for by their higher October quotas. Angolan exports bucked their declining trend and rose in October.
Output declined or did not increase in Republic of Congo, Equatorial Guinea and Gabon, the survey found, owing to a lack of capacity to produce more.
The biggest output decline – 70,000 bpd – was in Nigeria where output was disrupted after a recovery in September.
A Royal Dutch Shell venture in Nigeria declared force majeure on loadings of Bonny Light crude after a pipeline shut down.
The second largest decline was in Libya, one of the countries exempt from OPEC supply curbs, due to a pipeline leak.
Output in Iran, which has raised exports since the fourth quarter despite U.S. sanctions, showed little change in October. Talks to revive its 2015 nuclear deal with world powers, which would allow a larger export recovery, are set to resume.
Venezuelan output increased slightly, the survey found, helped by the arrival of Iranian condensate to help Caracas convert its extra heavy oil into exportable crude. The Reuters survey aims to track supply to the market and is based on shipping data provided by external sources, Refinitiv Eikon flows data, information from tanker trackers such as Petro-Logistics and Kpler, as well as information provided by sources at oil companies, OPEC and consultants.
Meanwhile, Kuwait has become the latest country urging OPEC and allies to stick with its plan to increase output gradually because oil markets were well-balanced.
This is coming as OPEC+ headed for a clash with the U.S. as more members rejected President Joe Biden’s call for the group to raise oil production faster and help reduce gasoline prices.
Yesterday, Kuwait joined Nigeria, Angola, Algeria and Iraq which made similar statements in recent days.
The OPEC, and its allies led by Saudi Arabia and Russia met last week Thursday with pressure from oil consumers mounting as prices climb toward $85 a barrel. American gasoline is at a seven-year high of $3.70 a gallon.
The U.S., India, Japan and other importers are waging a campaign to force the group to ease last year’s pandemic-triggered supply curbs more quickly.
“The idea that Russia and Saudi Arabia and other major producers are not going to pump more oil so people can have gasoline to get to and from work, for example, is not right,” Biden said Sunday.
While Biden declined to say how he would react if OPEC+ doesn’t change tack, analysts have speculated the U.S. might sell some of its strategic petroleum reserves.
OPEC+’s plan of boosting daily production by 400,000 barrels each month “is working well and there is no need to deviate from it,” Angola’s oil minister, Diamantino Pedro Azevedo, said Sunday.
Many members, including Saudi Arabia, have debated against pumping crude any faster as the pandemic still bear effect on demand. Some are already struggling to reach their higher output quotas after last year’s deep cuts, and say bringing production back more rapidly would make their task even more difficult.
While appearing on Bloomberg TV, “We are not yet out of the woods,” Saudi Energy Minister Abdulaziz bin Salman said. “We don’t take things for granted, we still have Covid,” he added.
OPEC+ has said that increasing crude exports would do little to bring down power prices, which have soared in parts of Europe and Asia due to shortages of natural gas and coal.
Still, OPEC+ has often surprised the market with sudden changes of policy. And while Riyadh and Moscow have both praised the group’s strategy, neither has directly addressed Biden’s comments in public, giving themselves room for maneuver.