Opec JMMC committee mulls cuts on demand concerns

Market: Crude oil
10/11/18

Rising global oil supplies, a weaker outlook for global oil demand growth, and a recent $15/bl decline in oil prices have combined to make a compelling argument for the Opec and non-Opec Joint Ministerial Monitoring Committee (JMMC) to recommend a return to production restraints in 2019.

The JMMC will formally meet on 11 November in Abu Dhabi to discuss various supply and demand scenarios following a meeting today of the group's Joint Technical Committee (JTC), which will present a report on the market outlook to the assembled ministers. The JMMC, co-chaired by Saudi Arabia and Russia and including member countries Algeria, Kuwait, Venezuela, Oman, is expected to conclude with a recommendation to amend production targets to avoid the risk of global over-supply, Opec delegates and technical experts tell Argus. The committee will present its final recommendation to Opec and non-Opec ministers at the full conference in Vienna on 6-7 December.

Opec and non-Opec compliance with the December-expiring 2016 agreement to remove around 1.7mn b/d from the oil market stood at 104pc in October on a preliminary basis. The figure may be subject to revision, pending the submission of production data from one of Opec's secondary sources. Argus found compliance by Opec countries participating in the November 2016 output deal eased to 122pc in October, down from 130pc in the previous month.

The possibility of further output discipline comes amid concerns over short-term demand, after Opec producers were given leeway to dial back over-compliance with their individual quotas and compensate for involuntary output declines from countries such as Iran and Venezuela.

"We are worried about the situation of the market, about the global economy, the demand, the supply," a delegate said.

The IEA, EIA and Opec all see non-Opec supply growth exceeding projections for demand growth in 2019, leading to a fall in the call for Opec crude. An average of the forecasts suggests that supply will outstrip demand by as much as 1.3mn b/d in 2019, if Opec keeps output at the Argus-estimated 13-month high of 33.02mn b/d hit in October. Last week's decision by the White House to exempt eight countries from the US commercial sanctions against Tehran for six months could also leave more Iranian supplies available, provided buyers can strike tenuous banking and shipping arrangements to secure their cargoes.

If renewed production discipline is agreed, the onus of limiting output would linger with Saudi Arabia, the UAE and Iraq – all of which have spare capacity and have raised production since June. Argus estimates that Saudi Arabia raised its crude production to 10.65mn b/d in October, just shy of its 10.72mn b/d record high in November 2016.

Iraqi production in October was just 20,000 b/d below a record-high of 4.65mn b/d in August and September, according to Argus estimates. Baghdad would be willing to participate in further Opec, non-Opec restraints, if there is consensus.

Saudi Arabia aims to agree an open-ended co-operation framework for Opec and non-Opec producers when they meet on 7 December, but Riyadh could encounter difficulties in bringing all producers on-board with a proposal for fresh output restraints. Russian production has added 450,000 b/d since May to strike a post-Soviet high of 11.4mn b/d in October.

Some delegates at the Abu Dhabi JMMC meeting say that Russia could prove difficult to persuade to lowering production, and do not exclude the possibility that Moscow might be offered a softer quota than the 300,000 b/d cut assigned in 2016. A re-negotiated deal could also see Opec countries emerge with production commitments different to the approximately 5pc cuts agreed in the 2016 deal.

It remains a possibility that Libya and Nigeria could be issued official quotas, after internal security concerns earned them exemptions from the previous agreement, and later an informal 1.8mn b/d combined production quota last November.

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21/11/24

Pemex's lean Zama spending undercuts goals

Mexico City, 21 November (Argus) — State-owned oil company Pemex's limited budget for developing one of Mexico's most-promising new oil fields is putting Mexico's crude production and refining goals at risk through 2030. First production from the Zama field will likely not start until at least 2028 instead of late next year, as forecast earlier, based on a timeline in a recent presentation from Pemex. Pemex continues to work on the basic engineering for the Zama field because of the lack of cash, staff of hydrocarbon regulator CNH said last week. The latest delay on Zama echoes criticism from when Pemex took over operating the field in 2022 that it did not have sufficient experience or funds to carry on with the project, said industry sources. "Unfortunately, the Pemex budget is always a shadowy mystery," said a person close to the project who asked not to be named. "There is no transparency or certainty regarding when they do and do not honor payment commitments." Zama is a shallow-water field unified in 2022 between Pemex area AE-152-Uchukil and the discovery made in 2017 by a consortium led by US oil company Talos Energy. Pemex holds 50.4pc of the Zama project while Talos and Slim's subsidiary Grupo Carso have 17.4pc, German company Wintershall Dea 17.4pc and British company Harbour Energy 12.4pc. The state-owned company expects to spend $370.8mn to develop Zama in 2025, 64pc less than the original $1.05bn budget proposed by Pemex for next year, according to data from CNH. The regulator cleared the change last week, but commissioners questioned the CNH staff about the new delays. Pemex's original development plan showed that the company forecast the first crude production by December 2025, with 2,000 b/d and about 4mn cf/d of gas. The original plan forecast Zama hitting peak production of 180,000 b/d in 2029, making it Mexico's second-largest crude producer, only under the Maloob field. President Claudia Sheinbaum and Pemex's new new chief executive Victor Rodriguez flagged the importance of shallow-water field Zama and ultra deep field Trion to support Pemex's oil production target of 1.8mn b/d in the upcoming six years in a presentation last week. Pemex's new plan is focused on feeding its own refining system rather than crude exports. The company expects to increase gasoline, diesel and jet fuel production by 343,000 b/d, according to the plan, but it did not give a timeline. Pemex produced 491,000 b/d of gasoline, diesel and jet fuel in the first nine months of 2024. Mexico's proposed 2025 federal budget also shows lower spending for Zama, at Ps3.1bn ($154mn) for 2025, even less than the figure approved by CNH on 14 November. Neither Pemex not Talos responded to requests for additional comment. "Zama is the story of the triumph of ideology over practicality," said a Pemex source who asked not to be named. The state-owned company is studying how to bring in new investors to the project once congress approves secondary laws to implement recent energy reforms, the source said. But uncertainty over the legal framework and the general deterioration of Mexico's business climate will make this more difficult, the Pemex source added. The involvement of Mexican billionaire Carlos Slim, who acquired 49.9pc of Talos Energy share in Zama last year, brought new hopes that work at Zama could finally accelerate. Instead, Slim's entrance slowed the project, as the new partner had to review the project, a former regulator who asked not to be named said. Talos Energy, the lead operator when the field was discovered over seven years ago, is now "frustrated" by the poor progress of the project. "We have Mexico, a great discovery in Zama, we're seven years into it, and still have not made a final investment decision on it," said Talos Energy interim chief executive Joseph Mills, in a conference call with investors last week. "So a lot of frustration there, as you can imagine." By Édgar Sígler Pemex 2024 crude output, throughput '000 b/d Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Cost of government support for fossil fuels still high

21/11/24

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21/11/24

Cost of government support for fossil fuels still high

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Cop: Talks in Baku torn between mitigation and finance

21/11/24

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21/11/24

Cop: Talks in Baku torn between mitigation and finance

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Cop: EU, four countries commit to 1.5°C climate plans

21/11/24

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21/11/24

Cop: EU, four countries commit to 1.5°C climate plans

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Cop: EU says finance draft text not acceptable

21/11/24

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21/11/24

Cop: EU says finance draft text not acceptable

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