Nigeria’s output aligns with quota as OPEC raises 2020 outlook
A rise in oil demand growth this year will be offset by a sharper increase in non-OPEC supply, OPEC said in its monthly oil market report published yesterday, even as Nigeria’s crude production last month, aligned with its quota of 1.77 million barrels daily (b/d), according to secondary sources. Oil demand growth for 2020 was revised up by 140,000 b/d to 1.22 million b/d.
This upward revision was due to a better economic outlook for 2020 in various economies, buoyed by improved trade sentiment between the U.S. and China. For 2019, the report showed that oil demand grew only by 930,000 b/d. Nigeria, which has pumped above its OPEC quota for months to the ire of other members, brought down its crude oil production in November, to fully comply with its cap, the Minister of State for Petroleum Resources, Timipre Sylva, said last month.
“Nigeria’s compliance level has witnessed tremendous progress, month by month, since last August, resulting in 100% compliance in November 2019,” the Ministry said in a statement. The country has been under pressure by Saudi Arabia and other OPEC members to improve its compliance, to help speed the bloc’s market rebalancing efforts. OPEC and 10 non-OPEC allies are in the midst of a 1.2mbd production cut agreement.
“Continued accommodative monetary policies, coupled with an improvement in financial markets, could provide further support to ongoing increases in non-OPEC supply,” the report said, adding that OPEC+ cuts remain essential in maintaining stability in the oil market.This comes a month after the producer group and its allies decided to deepen its output cuts from 1.2 million b/d to 1.7 million b/d from January through March 2020.
The pace of supply growth will continue to outpace oil demand, further putting pressure on interest for OPEC crude, which means it may need to keep its cuts going to balance the oil market.OPEC said demand for its crude will average 29.50 million b/d in 2020, which is 60,000 b/d above what it produced in December.
However, demand for its crude from January to March this year, which is the duration of its current cuts, will average 29.19 million b/d.Demand for OPEC crude averaged 30.60 million b/d in 2019.The group’s 14-member pumped 29.44 million b/d in December, compared with 29.61 million b/d in November, according to secondary sources.
The fall was due to declines in nine of its members, led by Saudi Arabia.Saudi Arabia’s crude output slid 296,000 b/d to 9.59 million b/d last month, according to official figures self-reported to OPEC.
This is the lowest since September, when the kingdom’s production slumped due to attacks at its Khurais and Abqaiq oil facilities.
However, secondary sources used by OPEC to monitor output — including S&P Global Platts — pegged Saudi Arabia’s December output slightly higher, at 9.76 million b/d.Saudi Arabia’s energy minister pledged to that the kingdom will keep production steady at 9.744 million b/d in January and February, in line with its promise to produce 400,000 b/d below its official OPEC+ quota during the first quarter.
Iraq continued to produce over its quota in December, though production has fallen in the last few months.Non-OPEC supply is projected to grow by 2.35 million b/d to 66.68 million b/d in 2020.
The key drivers of growth include the US, Brazil, Norway, Russia, Canada, Kazakhstan and Australia, while there are expected to be declines in Indonesia, Thailand, Egypt and Colombia.Non-OPEC supply averaged 64.34 million b/d in 2019, a year-on-year growth of 1.86 million b/d.
OPEC noted that US crude output is “continuing to increase, despite the pullback in drilling, as companies are running through their inventories of drilled but uncompleted (DUC) wells.”US crude oil production in 2020 is forecast to grow by 980,000 b/d to 13.18 million b/d.OPEC and its allies plan to meet March 5-6 in Vienna to review their production cut agreement and decide whether to extend them.
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