ABUJA, (The Southern African Times) – The compliance by members of the Organisation of Petroleum Exporting Countries (OPEC) and their allies known as OPEC Plus (OPEC+) with the group’s crude output restraint agreement edged higher in October as several members struggled to bring back production to meet their rising quotas.
Average compliance was 116 per cent last month, compared with 115 per cent in September, according to documents, indicating that the group continues to produce less than its agreed targets.
While the 10 OPEC participants were 121 per cent compliant with their October commitments, tightening compliance up from 115 per cent in September, the conformity among their non-OPEC counterparts fell to 106 per cent from 114 per cent.
The over-compliance was partly driven by Nigeria and Angola which had been struggling to grow production, with both countries around 240,000 bpd under their respective OPEC+ targets last month.
While over-compliance was welcomed last year when demand collapsed in the wake of the pandemic, the OPEC+ group now faces pressure from key oil-consuming countries to raise output faster to soften global oil prices.
An OPEC+ delegate told Argus, a company that provides business intelligence and market data that the figures excluded Mexico, which has not accepted a formal quota since July 2020, but remains part of the coalition and was sometimes factored into internal OPEC+ calculations.
The figures were broadly in line with estimates, which put total compliance at 115 per cent in October, with OPEC participants 120 per cent and non-OPEC at 107 per cent.
The United States had been pushing for higher OPEC+ supplies and now mulling a series of domestic countermeasures including a potential release from its Strategic Petroleum Reserve (SPR).
Two OPEC+ delegates said reports that the US had invited China and South Korea to consider co-ordinated SPR drawdowns are unlikely to pressure the coalition to hike production any faster, as the group considers the market to be well supplied.
OPEC+ ministers have previously expressed concern about a prospective seasonal surplus in the first quarter next year, with the cartel’s Secretary General, Sanusi Barkindo saying last week that global oil inventories could start to build as early as December.
If Washington were to co-ordinate the release of the reserves with other countries, the US would effectively be behaving like a member of the OPEC+ deal in trying to boost supply and reduce stocks.
Nigeria’s waning oil infrastructure, especially upstream, due to years of under-investment and last year’s OPEC-induced shut down of some oil assets aimed at complying with the production cuts on the back of the Covid-19 pandemic, have combined to hobble Nigeria’s production capacity.
For months, the country has been unable to meet its production obligation to the producers’ group, further leading to a situation where demand outstripped supply by at least 600,000 bpd last month.
As a result of the increasing underperformance, OPEC produced barely half the oil production increase it had planned for October as African members, especially Nigeria and Angola continued to struggle with output losses.
OPEC is reviving supplies halted during the pandemic, but added only 140,000 barrels a day last month because of the difficulties faced by both countries, according to a recent survey.
The combination of a recovery in fuel consumption after the pandemic and constrained supply has led to a global energy crunch which has been felt most acutely in natural gas markets, as Brent crude, Nigeria’s benchmark, has rallied 30 per cent since late August.
Last month, Angola’s production slumped by 70,000 barrels a day to 1.1 million , sinking back to the 14-year low reached earlier this year, according to the survey as the country has been plagued by investment constraints resulting in declining supply from deep water oil fields. Also, Nigeria’s output fell in October, just above the five-year low hit in August.
Total production by the group’s 13 members was 27.58 million barrels a day, while overall, the cartel is curbing output by 15 per cent more than stipulated by its production quotas.
The development meant that the increase in OPEC’s oil output in October fell short of the rise planned under a deal with allies as involuntary outages in some smaller producers offset higher supplies from Saudi Arabia and Iraq.
However, the OPEC+ alliance is wary of pumping too much oil in case of renewed setbacks in the battle against COVID-19.
The OPEC+ agreement allowed for a 400,000 bpd production increase in October from all members, of which about 254,000 bpd was shared by the 10 OPEC members covered by the deal.
