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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Leaked Document: OPEC+ Struggling To Lift Oil Production

OPEC and its Russia-led non-OPEC allies are struggling to fully deliver on the oil production increase of 1 million bpd promised in June, Reuters reported on Friday, quoting an internal OPEC document that it has seen.

OPEC and allies agreed in June to relax compliance rates with the cuts to 100 percent from the previous over-compliance. The respective leaders of the OPEC and non-OPEC nations part of the deal—Saudi Arabia and Russia—have been interpreting the eased compliance as adding a total of 1 million bpd to the market.

The document that Reuters has seen, however, showed that the significant production increases in Saudi Arabia and Russia were offset by declines in Iran, Venezuela and Angola within OPEC, and by production drops in Mexico, Kazakhstan, and Malaysia from non-OPEC.

Increasing production “is a work in progress,” OPEC Secretary General Mohammad Barkindo said this week. At an event in India he also reiterated OPEC’s position that “our current view is that the market is at the moment adequately supplied and well-balanced, though in a fragile state.”

According to the internal OPEC document prepared for a technical panel meeting scheduled for Friday, OPEC—excluding Nigeria, Libya, and Congo—increased its combined production by 428,000 bpd in September compared to May. Saudi Arabia put the most extra barrels on the market and boosted its production by 524,000 bpd in September compared to May. Iraq, Kuwait, and the United Arab (UAE) also increased their production, according to the document seen by Reuters.

However, Iran’s production slumped by 376,000 bpd in September from May, Venezuela’s output plunged by 189,000 bpd, and Angola saw its production drop by 17,000 bpd between May and September.

The non-OPEC partners in the deal have increased their combined production by 296,000 bpd since May. Russia boosted production by 389,000 bpd, but part of that increase was offset by declines in Kazakhstan, Mexico, and Malaysia.

By Tsvetana Paraskova for Oilprice.com

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  • Mamdouh G Salameh on October 19 2018 said:
    It is no secret that OPEC plus Russia are not able to raise their production beyond the 650,000 barrels a day (b/d) which Saudi Arabia (400,000 b/d) and Russia (250,000 b/d) added two months ago. UAE may have added 28,000 b/d, a total of 678,000 b/d. This is some 322,000 b/d less than the 1 million barrels a day that OPEC+ agreed to add to the global oil market by easing compliance of the OPEC-non-OPEC production cut agreement in June this year.

    With the failure of the talks between Saudi Arabia and Kuwait to agree to restart the oilfields in the Neutral Zone which is shared equally between them, Saudi Arabia has lost the opportunity to add an extra 250,000 b/d more to the market.

    Still, the global oil market still has a small pocket of glut which is capable of taking care of outages in Venezuela and elsewhere. This is proven by the fact that the highest level the oil price reached is $86 a barrel but it couldn’t stay there long enough because of this small pocket of glut.

    And despite claims by the likes of the International Energy Agency (IEA), Reuters and Bloomberg, Iran’s oil exports have not fallen at all. Any halting of Iranian oil purchases by Japan and South Korea in compliance of US sanctions are being more than offset by increasing purchases by China and India. Still, Japan and South Korea will most probably be getting US sanction waivers.

    Iran’s oil exports have been averaging at 2.2 million barrels a day (mbd) this year. Claims that they have fallen from 2.4 mbd to 1.6 mbd are fake news aiming to influence the global oil market and prices.

    Iran is reported to have shipped an estimated 20 million barrels of crude to China. Moreover, India’s purchases from Iran jumped from 390,000 b/d in August to 600,000 b/d in September.

    Furthermore, China could singlehandedly nullify US sanctions altogether by importing the total Iranian oil exports amounting to 2.2 mbd and paying for them in petro-yuan. Moreover, the petro-yuan has made the US sanctions useless and has provided a way by which Iran could bypass the petrodollar and the sanctions altogether.

    US sanctions against Iran oil exports are doomed to fail miserably and Iran will not lose a single barrels from its oil exports based on my analysis of the realities in the global oil market.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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