S&P: Once Again, Nigeria Leads Africa’s Underperformance as OPEC’s Output Gap Grows

Nigeria led other African countries in their perennial oil production underperformance in July, a new S&P Global report has found.

The Organisation of Petroleum Exporting Countries (OPEC) African members, collectively fell severely short of their quotas last month, continuing a longstanding trend.
Nigeria and Angola, the two biggest producers in the continent, were 569,000 bpd and 332,000 bpd below their July targets, the survey found.

But the firm was quoting secondary sources, as against the over 700,000 bpd reported days ago by THISDAY, quoting figures from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).
Nigeria has had to deal with a barrage of security, operational, and technical problems at its key oil infrastructure since last year, while Angolan production is also facing technical issues, aggravated by a lack of upstream investment and incentives.

However, OPEC and its nine allies posted their highest monthly crude oil production rise in five months in July, led by gains in Saudi Arabia and Kazakhstan, according to the S&P insights.
The OPEC+ alliance hiked output by a hefty 490,000 bpd from June—although that was still short of the 648,000 bpd promised when the group agreed to accelerate their quota increases for July and August to help meet rising demand.

OPEC produced 29.08 million bpd, up 250,000 bpd from June, as almost all of its Middle Eastern members posted steady gains. Meanwhile, OPEC’s nine allies averaged 13.50 million bpd, a rise of 240,000 bpd, boosted by a recovery in Kazakh and Russian output.

As a whole, the entire OPEC+ coalition pumped 42.58 million bpd, its most since March, the month after Russia invaded Ukraine.

But with many members struggling to even maintain output, the gap between OPEC+ production and its quotas grew to 2.80 million bpd—more than what Kuwait, the alliance’s fifth biggest member, pumped in July.

As a result, quota compliance ballooned to a record high of 222.9 per cent in the month, according to S&P Global calculations.
More than half of OPEC+ members have seen their production hit by sanctions, geopolitical instability, unplanned outages, scheduled maintenance, and technical issues.

Saudi Arabia and the UAE, who together hold virtually all of the world’s spare production capacity, added a total of 280,000 bpd to the market in July, the survey found.
Saudi Arabia boosted output by 220,000 bpd, supported by a significant rise in exports along with an increase in crude burn for power generation.

The OPEC kingpin pumped 10.77 million bpd, its highest in more than two years, but this was still slightly short of its July quota of 10.83 million bpd.
UAE, which is now OPEC’s third-largest oil producer, increased output to 3.14 million bpd, a 60,000 bpd monthly rise. Meanwhile, Iraq and Kuwait added 70,000 bpd and 50,000 bpd, respectively, in July, the report found.

Russia’s output recovery continued, albeit at a slower pace. The sanctions-hit country pumped 9.80 million bpd in July compared to 9.75 million bpd in June and 9.29 million bpd in May.
The July figure was still more than 300,000 b/d short of pre-invasion levels, as western sanctions have hampered its wellhead production. Crude exports fell steadily in July, but Russian refining runs were up sharply on robust domestic demand.

Fellow non-OPEC producer Kazakhstan saw its output rebound to 1.39 million bpd, an increase of 170,000 bpd from June. Kazakhstan’s second biggest oil field, Kashagan, was offline for only half of the month because of major planned maintenance that began in May.

The Central Asian country could see further disruptions this month, as production from its highest producing crude oil field, Tengiz, will be reduced because of planned maintenance. A gas leak at a processing plant at Kashagan was also reported in early August.

Meanwhile, Libya, which is exempt from an OPEC+ quota due to its internal instability, kept output flat in July at 650,000 bpd as the producer managed to resolve its oil blockades and shutdowns by mid-month.

Production is now hovering above 1 million bpd after a force majeure at its major oil terminals and fields was lifted. New management took over at state-owned National Oil Corporation July 14, after its long-serving chairman, Mustafa Sanalla, was sacked and replaced by ex-central bank governor Farhat Bengdara.

The overall OPEC+ production increase was a welcome supply boost to a global economy suffering from sky-high inflation, with a potential recession looming in the months ahead.
August will see the alliance hike quotas by another 648,000 bpd although, as with July, how much of the increase can be fulfilled remains a major question.

Amid this backdrop, OPEC+ agreed at its August 3 meeting to raise September quotas by only 100,000 bpd over August, with officials citing concerns over coronavirus cases and other economic headwinds, along with an expected seasonal easing of demand.

Platts Analytics said this “modest” increase underscores the minimal level of global spare capacity.

“OPEC+ quota hikes will reduce spare capacity to 1 million bpd in September, less than 400,000 bpd of which is sustainable for more than a quarter,” said Paul Sheldon, chief geopolitical adviser at Platts Analytics. OPEC+ ministers will next meet Sept. 5 to decide on October production targets.

The survey figures, which measure wellhead production, are compiled using information from oil industry officials, traders, and analysts, as well as reviewing proprietary shipping, satellite, and inventory data, the report said.

Emmanuel Addeh

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