Nigeria pledges compliance to new OPEC quota as output plunges
Attacks on Saudi Arabia’s Abqaiq processing facility and Khurais field, caused its crude output to plummet to 8.45 million barrels per day (b/d) in September, which, combined with the effects of U.S. sanctions on Iran and Venezuela, caused OPEC production to tumble to 28.45 million b/d, according to the survey.
That is a 1.48 million b/d fall from August, the largest month-on-month shrinkage for the producer group since a Venezuelan strike in December 2002, caused much of the state-owned oil company PDVSA’s operations to grind to a halt.
For Nigeria, output dropped 40,000 b/d to 1.94 million b/d, the survey found.
Minister of State for Petroleum, Timipre Sylva, last week said the country had received a new OPEC production quota of 1.77 million b/d, up from 1.69 million b/d, pledging that the country would be fully compliant this month.
There may be pressure to comply to the quota, as the Senate has approved the 2020 Medium Term Expenditure Framework (MTEF), and Fiscal Strategy Paper (FSP).
The lawmakers increased the crude oil benchmark price to $57 per barrel against the $55 proposed by President Muhammadu Buhari, and also put the daily production output at 2.18 million barrels per day.
Nigerian officials have insisted that some grades of its crude should be counted as condensate, which is not subject to OPEC caps.
The September figure, which measures production at the wellhead, is also OPEC’s lowest since May 2009, which came five months after the organisation agreed at an extraordinary meeting to implement its deepest output cuts to shore up cratering oil prices due to the global financial crisis.
OPEC is almost three years into its latest commitment to cut production — forged with Russia and nine other non-OPEC allies.
Though Saudi Arabia, as the group’s de-facto leader, has in most months voluntarily slashed its output more than it pledged to, the attacks on September 14, caused the biggest involuntary outage in its history and brought its production down to its lowest since January 2011, according to Platts survey archives.
As a result, compliance among the 11 OPEC members with quotas under the 1.2 million b/d OPEC/non-OPEC production cut accord, which runs through March 2020, surged to 308%.
Saudi officials have sought to reassure the market in recent days its production has now been restored to pre-attack levels of around 9.9 million b/d, but the initial aftermath took some 5.7 million b/d of output capacity offline, forcing the kingdom to draw on its considerable oil inventories to keep customers supplied.
With the repairs at the Abqaiq crude processing facility — the world’s largest — expected to take months, Saudi Arabia has already begun to inform customers that some cargoes of Arab Light and Arab Extra Light may be substituted with lower value grades of Arab Medium and Arab Heavy.
The kingdom has blamed the attacks on Iran, which has denied involvement. Iran has threatened crude flows through the Persian Gulf in retaliation for harsh U.S. sanctions, backed by Saudi Arabia that have crippled its oil exports.
Iranian crude production dropped to 2.23 million b/d in September, the Platts OPEC survey found, as the country continues to face difficulties in finding willing buyers for its oil. That is its lowest output since August 1988, according to Platts survey data.
In Venezuela, on which U.S. sanctions targeting its oil sector have also been tightened, crude output shrank to 600,000b/d in September, the Platts found, even less than the 650,000 b/d it pumped in January 2003, with the PDVSA strike in full effect.
Other significant falls in September included one in Iraq, where production was down 80,000 b/d, under pressure from Saudi Arabia at an OPEC/non-OPEC monitoring committee meeting in Abu Dhabi just days before the attacks. New Saudi Energy Minister, Prince Abdulaziz bin Salman, had publicly called on Iraq, Nigeria, and other countries pumping above their committed output quotas to tighten compliance.
Iraq’s September production of 4.80 million b/d is still significantly over its cap of 4.51 million b/d. It had hit an all-time high in August.
Libya posted the sole rise of note, with its production growing 90,000 b/d in September due to the restart of its Sharara oil field in late August, according to the survey.
Ecuador, OPEC’s fourth-largest producer, announced last week it was quitting OPEC at the end of the year, citing fiscal austerity measures, as it pursues higher oil revenues unconstrained by its production quota. The country pumped 540,000 b/d in September, the survey found.
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