Opec crude output rises on Iranian recovery

Spanish Market: Crude oil
07/05/21

Opec crude production rose by 70,000 b/d in April to hit a three-month high of 24.96mn b/d, boosted by rising Iranian output.

Iran overtook Kuwait to become Opec's fourth-largest producer, increasing output by 80,000 b/d to 2.35mn b/d last month, a level not reached since May 2019, according to Argus' latest survey. Tehran has now added 400,000 b/d since October last year.

The rise coincides with ongoing talks aimed at reviving the 2015 Iran nuclear deal and lifting US sanctions on Iranian oil exports. US officials say sanctions relief can be swiftly implemented if an agreement is struck, and some analysts expect a breakthrough in the talks within 6-8 weeks. Iran could raise its oil exports to 2.5mn b/d once the sanctions are removed, according to vice-president Eshaq Jahangiri.

Analysts estimate that Iran currently exports at least 650,000 b/d, much of it to independent Chinese refineries, which dilute it with light sweet crude. These refiners will struggle to clear more Iranian crude through customs until the release of a second batch of 2021 import quotas, forcing current arrivals to back up in storage.

Saudi Arabia delivered the second-largest output hike among Opec producers last month, although it was still just under 1mn b/d below its 9.12mn b/d Opec+ quota. Riyadh is set to unwind the extra 1mn b/d cut by 250,000 b/d in May, a further 350,000 b/d in June and another 400,000 b/d in July. A seasonal increase in crude burn for air conditioning means this rise may not be reflected in exports.

The higher production from Saudi Arabia and Iran offset declines in north and west Africa. Libya shed 50,000 b/d last month after funding issues forced state-owned NOC subsidiary Agoco to shut in production, while Angolan and Nigerian output dropped by a combined 60,000 b/d. Overall Opec+ output — which includes nine non-Opec counties but excludes Opec members Iran, Libya and Venezuela — increased by 260,000 b/d last month but remained below the group's collective April quota of 35.2mn b/d.

The 10 Opec participants in the output restraint deal retained a 125pc compliance rate, but conformity among their non-Opec counterparts declined to 91pc, the lowest since May 2020. Leading non-Opec producer Russia once again exceeded its quota amid a surge in exports. Seaborne Urals shipments jumped to 1.4mn b/d in April from 1.16mn b/d in March, according to Vortexa data. Russia had already accrued the equivalent of around 26mn bl of overproduction between May last year and March this year, an internal Opec document shows.

After freezing most quotas in recent months, the Opec+ coalition will raise its collective ceiling by 350,000 b/d in May, another 350,000 b/d in June and 441,000 b/d in July — although the group has reserved the option to reverse course should market conditions warrant it. The additional supply will come at a time of muted demand in India, which is struggling to contain a rapid surge in Covid-19 cases. India accounted for just under half of all new cases worldwide last week, according to the World Health Organisation.

By Ruxandra Iordache

Opec+ wellhead production				mn b/d
	April	March*	April target	Compliance (%)
Opec 10†	20.99	20.97	22.12	125
Non-Opec	13.30	13.07	13.08	91
Total	34.29	34.03	35.20	113
Opec
Saudi Arabia	8.13	8.08	9.12	153
Iraq	3.92	3.93	3.86	92
Kuwait	2.33	2.33	2.33	100
UAE	2.62	2.61	2.63	101
Algeria	0.86	0.86	0.88	109
Nigeria	1.45	1.47	1.52	121
Angola	1.12	1.16	1.27	156
Congo (Brazzaville)	0.27	0.27	0.27	107
Gabon	0.19	0.17	0.16	6
Equatorial Guinea	0.11	0.09	0.11	100
Opec 10†	20.99	20.97	22.12	125
Iran	2.35	2.27	na	na
Libya	1.14	1.19	na	na
Venezuela	0.48	0.46	na	na
Total Opec 13	24.96	24.89	na	na
Non-Opec
Russia	9.52	9.33	9.38	91
Oman	0.73	0.73	0.73	101
Azerbaijan	0.59	0.59	0.60	105
Kazakhstan	1.52	1.50	1.46	76
Malaysia	0.46	0.44	0.49	128
Bahrain	0.17	0.17	0.17	100
Brunei	0.09	0.08	0.09	93
Sudan	0.06	0.06	0.06	138
South Sudan	0.16	0.16	0.11	-155
Total non-Opec	13.30	13.07	13.08	91
*revised numbers
† Iran, Libya and Venezuela are exempt from the agreement

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