Opec+ extra cuts will end in June: Update

Market: Crude oil
08/06/20

Adds details from Saudi oil minister on compliance in paragraphs 6-8

Mideast Gulf countries that pledged deeper crude cuts beyond their Opec+ commitments this month do not plan to extend these into July, Saudi oil minister Prince Abdulaziz bin Salman said today.

Opec+ agreed on 6 June to extend the first phase of its two-year production restraint deal to the end of July for all participants except Mexico. The group agreed in April to cut May-June production by 9.7mn b/d, largely from an October 2018 baseline.

Saudi Arabia, Kuwait and the UAE pledged additional cuts in June, which would cap Saudi production at 7.49mn b/d, Kuwaiti output at or below 2.09mn b/d and UAE production around 2.35mn b/d. Non-Opec Oman pledged to take an additional 15,000 b/d off the market in June, above its commitment. In total these removed around 1.2mn b/d from the market in June.

These deeper voluntary cuts were for one month only and will not be extended into July, Prince Abdulaziz said today. He said that they have served their purpose and improved the atmosphere among the group to encourage countries to act in a more committed way.

The deal struck at the weekend hinges on countries that produce above their quotas in May and June making up for this non-compliance in the July-September period. This means that overall cuts could exceed the 9.6mn b/d for July and the 7.7mn b/d planned for August and September, Prince Abdulaziz said. He said that compliance will be self-enforced, although the group's Joint Ministerial Monitoring Committee (JMMC) — which tracks observance — will meet every month until the end of the year. It will next assemble on 18 June.

Prince Abdulaziz, who chairs the JMMC, indicated that it will not come up with specific numbers for any additional cuts that over-producers would have to implement. He said that the compensatory amounts would be determined by May and June output numbers provided by the secondary sources — of which Argus is one — that Opec uses to determine production numbers.

But the minister said that he would not be tolerant towards non-compliers.

"We have no room whatsoever for lack of conformity," he said. "We have no stomach for any types of laxities in terms of self-imposed obligations that need to be attended to."

The Opec+ agreement comes as Libya — which is exempt from Opec+ output restraints — resumes production at its 300,000 b/d El Sharara field after a five-month shutdown. Prince Abdulaziz said the Opec+ group will consider this development, but that it would be unproductive to engage in discussion about it so soon. He said that the group can accommodate an additional 300,000 b/d.

By Rowena Edwards, Samira Kawar and Nader Itayim

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US refiners cannot readily replace Canadian oil: AFPM

Calgary, 27 November (Argus) — US refiners that process Canadian crude would not easily find alternative supplies if president-elect Donald Trump follows through on his tariff plans, potentially threatening the viability of some fuel producers, a US refining industry group warned today. Trump on Monday said he would impose a 25pc tariff on imports of all goods from Canada and Mexico, claiming those two countries need to tighten borders they share with the US. Such tariffs would be problematic for US refiners that have come to rely on a steady diet of Canadian crude, much of which comes from the western, oil-rich province of Alberta. "There is no easy, fit-for-purpose replacement for this crude oil," the American Fuel and Petrochemical Manufacturers (AFPM), which advocates for many US refiners, said on Wednesday. Canadian oil is the number one refinery feedstock in the US midcontinent, accounting for 65pc of all crude runs in the region, according to AFPM. Refiners in the region have limited connectivity to US crude and refined products pipelines, so tariffs could sharply increase operating costs and even threaten their viability, the association said. Many refineries were built prior to the US shale boom and are suited for heavier, high-sulfur crudes that typically come from foreign sources. Canada exported about $428bn in goods and services to the US in 2022, while the US exported $481bn to Canada, according to US data. Petroleum makes up a substantial part of Canada's exports, with roughly 4mn b/d of Canada's 5mn b/d of production shipped to the US. Of this, about 3mn b/d is destined for the US midcontinent region. "The crude oil pipeline logistics have changed over the decades such that the loss of Canadian oil into these regions can only be replaced with domestic production," Lipow Oil Associates president and industry analyst Andrew Lipow told Argus Wednesday. "Unfortunately, there is very little pipeline capacity to deliver crude oil produced in Texas and New Mexico to refineries in Montana, Minnesota, and Chicagoland." Lipow suggested three scenarios, or some combination thereof, may unfold: Canadian crude would need to be further discounted to overcome the tariff; US refiners would pay more for crude, including for domestic WTI that would rise to import parity; or Canadian crude would be exempted from tariffs and there would be no change. "The extent of the price impact depends on one's locations, but certainly seems to me that the consumer will be paying more for energy," Lipow said. Tariffs on crude and refined products "will not help our industry compete, nor will they support US energy dominance and affordability for consumers", AFPM said. The American Petroleum Institute (API), another industry group, agreed. "Maintaining the free flow of energy products across our borders is critical for North American energy security and US consumers," an API spokesperson said. By Brett Holmes Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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26/11/24

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Nigeria restarts Port Harcourt refinery: Update

26/11/24

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26/11/24

Nigeria restarts Port Harcourt refinery: Update

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