Opec+ production falls sharply in July

Opec+ production dropped by more than 1mn b/d in July, according to Argus' assessment, as Russia finally delivered on its promised cuts while Saudi Arabia came close to fully implementing its additional output reduction.

Russia's crude production fell as it followed through on its pledge from earlier this year to cut output by an extra 500,000 b/d. The latest decline put production in July at Russia's effective Opec+ target, including extra cuts, of 9.3mn b/d. Output fell on the back of a drop in exports, which mostly affected the Urals stream. Urals prices went above the G7 price cap last month, making them ineligible for marine insurance and financing from companies in the G7 and EU. While some market participants said they were confident that this would not disrupt flows, the rise in the grade's price is probably curbing demand in the delivered markets of Asia-Pacific.

Riyadh came close to fully delivering on its promised 1mn b/d production cut for July. Saudi production was down by 970,000 b/d on the month to 9mn b/d, a two year low, as exports and refining throughput rates both took a tumble. The combined production cuts took Opec+ output to 35.7mn b/d, the lowest since June 2021 (see table). The eight Opec+ producers, excluding Russia, that agreed to remove 2.16mn b/d from the market in July fell just 150,000 b/d short last month, producing a combined 22.25mn b/d.

Saudi Arabia said on 3 August it will extend its unilateral 1mn b/d crude production cut, first announced for July, for another month in September. This is the second monthly extension to the cut first announced after the Opec+ group's most recent meeting in early June. But unlike the first extension, Saudi Arabia said its cut could be "extended or extended and deepened" if necessary.

Russia said the same day that it will extend its export cut to next month — but only partially. It plans to reduce exports by 300,000 b/d, deputy prime minister Alexander Novak said, down from the 500,000 b/d cut it volunteered for this month.

Disruption resurfaces

The 10 Opec producers subject to targets still undershot their implied target of 23.377mn b/d by close to 640,000 b/d in July — mainly because Nigeria and Angola are underproducing substantially relative to their quotas. Nigerian output fell in July as disruption affected Forcados exports. The Forcados export terminal remains shut after operations were halted on 12 July following a suspected leak.

Iraq's production rose to its highest since March, when deliveries of Kurdistan Regional Government crude by pipeline to the Turkish port of Ceyhan were suspended. Deliveries along the line have yet to resume but Iraq's semi-autonomous Kurdistan region is supplying refineries in the north of the country with 50,000 b/d of crude, a source told Argus.

Output was mixed among producers not subject to targets. Around 350,000 b/d of Libya's 1.2mn b/d of crude output was shut in on 13-14 July by protests at two key fields in the southwest. Production was swiftly restored following a key politician's release in Tripoli on 15 July.

Iranian output rebounded further. A key member of the Iranian parliament's energy commission, Hossein Hosseinzadeh, said at the end of July that crude output has risen to 3.1mn b/d, the highest for close to five years. The last time national production was above 3mn b/d was in October 2018, according to Argus figures. The recent rise in production has been supported by increased exports to its primary buyer China, and to its fellow sanctioned allies Venezuela and Syria.

By Denise Albrighton