Recovery in Nigeria, Libya push OPEC output up by 270,000 in May

Sharp output recovery in Nigeria and Libya  pushed  up OPEC output in May  by 270,000 barrels per day  to 32.12 million barrels  per day, the two countries are exempted the   organisation’s production cut.

Nigeria’s production in May rose to 1.73 million b/d, up 80,000 b/d from April, its highest level since March 2016, due to the restart of Forcados crude exports.

At least two tankers left the Forcados terminal last month, the first loadings since late October. Nigerian crude production is expected to rise even further in June, with Forcados loading schedules averaging 251,667 b/d, according to trading sources.

Two weeks ago, the country’s oil minister Emmanuel Kachikwu said Nigeria would join in the OPEC-led output cuts should its pure crude production return to 1.8 million b/d.

Industry analysts say with full resumption of operation by  Forcados pipeline the global market would witness  more crude oil  pumped from  Nigeria as another 252,000 barrels per day of crude would be expected to leave for the world market.

Royal Dutch Shell lifted force majeure on Forcados crude oil for the first time since it went in place in February 2016, putting light sweet crude differentials under serious downward pressure.

The first cargo that loaded for Shell late last month aboard the Astro Perseus was en route to Argentina, according to ship tracking data and traders. The second, which loaded for Vitol, was expected to go to the SIR refinery in Ivory Coast.

Forcados offers were emerging, but prices were only available on request. Traders said tentative offer levels were around flat to dated Brent, with trades more likely at a discount until the grade proved its reliability after more than a year of shutdown.

Around 40 cargoes were still available for July, in addition to as many as 20 for June.

May production rose despite very high compliance from both Saudi Arabia and Angola, as Iraqi output also rose steeply.

This was the first time since October that OPEC observed a month-on-month rise in production, as output from Libya and Nigeria surged to multi-year highs.

Nigeria’s and Libya’s combined January-May average output of 2.312 million b/d is now 101,000 b/d higher than their October levels, the benchmark month against which the rest of OPEC members’ cuts are determined, according to the Platts survey.

With production in these countries expected to continue to grow this summer as they recover from militancy-related outages, OPEC faces a tricky period in its attempt to accelerate the market’s rebalancing.

OPEC’s collective May output was some 350,000 b/d above its stated ceiling of 32.5 million b/d, when Indonesia, which typically produces about 730,000 b/d, is added in. Among the 11 members with quotas under the production cut deal, compliance is 117%, according to Platts calculations.

On May 25, OPEC and 10 non-OPEC partners including Russia decided to roll over a 1.8 million b/d production cut agreement into March 2018.

This decision has so far proved unsuccessful in convincing a wary market that the producer group’s efforts to clear the glut of oil in storage are sincere, as prices remain below $50/b.

OPEC’s largest producer Saudi Arabia saw its production fall to 9.93 million b/d in May, down 40,000 b/d from the previous month, as survey panelists said exports were down significantly despite a rise in direct crude burn.

Saudi Arabia has consistently cut more than its quota for five months in a row, the only country to do so. The kingdom was allocated a quota of 10.058 million b/d under the agreement.

Angola, another producer that has exceeded its cut commitments in the first five months of the deal, saw its production fall 40,000 b/d from the previous month to 1.64 million b/d in May.

 

Olusola Bello with agency report