Last week saw the release of OPEC's November Oil Market Report, which includes the details on OPEC's & global oil data for October, and hence it gives us a picture of the global oil supply & demand situation as Chinese demand grew faster than expected, after their first half recovery from the country's restrictive Covid policy had stalled over the summer, while oil supplies continued to be impacted by the the most recent unilateral million barrel per day production cut by the Saudis and an additional 300,000 million barrel per day supply cut by Russia. October was also the tenth month that OPEC and aligned oil producers were operating under a 2 million barrel per day production cut, meant to take roughly 2% of global oil supplies off the market, in response to a perceived global surplus and related lower prices of a year ago, and the fifth month of a Saudi led cut of an additional 1.16 million barrels per day, which, when combined with a unilateral 500,000 million barrel per day Russian cut, was intended to take an additional 1.66 million barrels per day off the market for the rest of this year All told, then, the members of the "OPEC+" cartel had committed to holding 4.66 million barrels per day, or roughly 4.6% of global supplies, off the market during this month, and through the end of the year ...
The first table from this month's report that we'll review is from the page numbered 49 of the report (pdf page 59), and it shows oil production in thousands of barrels per day for each of the current OPEC members over the recent years, quarters and months, as the column headings below indicate. For all their official production measurements, OPEC has been using an average of production estimates by as many as eight "secondary sources", namely the International Energy Agency (IEA), the oil-pricing agencies Platts and Argus, the U.S. Energy Information Administration (EIA), the oil consultancy Cambridge Energy Research Associates (CERA), the industry newsletter Petroleum Intelligence Weekly, the energy consultancy Wood Mackenzie and the research and intelligence firm Rystad Energy, as a means of impartially adjudicating whether their output quotas and production cuts are being met, to thereby avert any potential disputes that could arise if each member reported their own figures…
As we can see in the bottom right hand corner of the above table, OPEC's oil output increased by 80,000 barrels per day to 27,900,000 barrels per day during October, up from their revised September production total that averaged 27,820,000 barrels per day. However, that September OPEC output figure was originally reported as 27,775,000 barrels per day, which therefore means that OPEC's September production was revised 45,000 barrels per day higher with this report, and hence OPEC's October production was, in effect, 125,000 barrels per day more than the previously reported OPEC production figure (for your reference, here is our copy of the table of the official September OPEC output figures as reported a month ago, before this month's revision)...
Since the increase in OPEC production in October was led by a 51,000 barrel per day increase by Angola and a 46,000 barrel per day increase by Iran, it remains in line with their previously announced cuts, since Iran is exempt from those cuts, while Angola had been underproducing by hundreds of thousands of barrels per day, Production from Kuwait, which has been producing above their assigned quota, was down by 26,000 barrel per day, while production from the Emirates, another overproducer, rose by 16,000 barrels per day...
The additional million barrel per day output cut the Saudis first implemented in July and recently extended to the end of this year was the latest in a series of oil supply cuts imposed by the OPEC+ cartel over the past year, beginning with a 2 million barrel per day production cut that the joint agreement imposed on all producers in October 2022...following that, six OPEC oil producers, led by the Saudis, and two other oil producers aligned with OPEC+, came to an agreement at the beginning of April to further reduce their combined production by an additional 1.16 million barrels per day beginning in May, over and above the formal OPEC cuts. In addition, Russia agreed to extend their ongoing 500,000 barrels per day cut for the rest of the year for a total cut of 1.66 million barrels per day from those nine producers. Production cuts for OPEC members under that agreement included 500,000 barrels per day (bpd) from the Saudis, 211,000 bpd from Iraq, 140,000 bpd from the Emirates, 128,000 bpd from Kuwait, 48,000 barrels per day from Algeria, and 8,000 barrels per day from Gabon. Four months ago, our initial assessment was that only the Saudis managed to hit the additional production cut target in May, and only Algeria joined them in June, indeed, most of the others who announced cuts in April increased their production over the June through September period, rather than cutting it, and it appears that's also been the case in October. Hence, the net production reduction remains less than half of what had been committed to by the parties to that April 2nd agreement..
Furthermore, OPEC and other aligned oil producers had previously agreed to reduce production by 2,000,000 barrels per day beginning last November, so the net 917,000 barrels per day OPEC ex-Saudi Arabia have cut since then is also short of that. However, OPEC's production was already running 1,585,000 barrels per day below what they were expected to produce when that policy was initiated in October of last year, so the 27,900,000 barrels per day OPEC produced in October still leaves them short of what they were expected to produce during the month, as we'll see in the next table...
The above table was originally included as a downloadable attachment to the press release following the 33rd OPEC and non-OPEC Ministerial Meeting on October 5th, 2022, which set OPEC's and other aligned oil producers' production quotas for November 2022 and the following months through the end of 2023, and the quotas shown above were reaffirmed by the cartel for 2023 in during the 34th OPEC and non-OPEC Ministerial Meeting on December 4th, 2022. The first column above, labeled "August 2022 required production", actually matches the October 2018 baseline production level on which OPEC and aligned producers have based all of their quotas since the onset of the pandemic, and the "Voluntary adjustment" is the production cut each country is expected to make from that benchmark level to achieve a 2 million barrel per day cut for the cartel as a whole, leaving each country with a "Voluntary Production" level they're expected to hit each month during 2023, whether they've been able to produce that much recently or not. Since war torn Libya and US sanctioned producers Iran and Venezuela have been exempt from the production cuts imposed by the joint agreement that has governed the output of the other OPEC producers since May of 2020, they are not shown on the above list, and OPEC's quota excluding them is aggregated under the total listed for the 'OPEC 10', which you can see was expected to be at 25,416,000 barrels per day from November 2022 through December 2023...
With the April 2nd agreement, six members of OPEC agreed to further reduce their production by 1,035.000 starting in May and through the end of the year. Thus the voluntary production level for the OPEC 10 would have been reduced to 24,381,000 through December.. Subtracting the one million barrel per day cut from the Saudi's production initiated in July from that would leave OPEC's 'voluntary production' level at 23,381,000 barrels for the month of October. Therefore, the 22,891,000 barrels those 10 OPEC members actually produced in October were 490,000 barrels per day short of what they were expected to produce during the month, with Nigeria and Angola still accounting for the majority of this month's production shortfall...
The next graphic from this month's report that we'll look at shows us both OPEC's and worldwide oil production monthly on the same graph, over the period from November 2021 thru October 2023, and it comes from page 50 (pdf page 60) of OPEC's November Oil Market Report. On this graph, the sky blue bars represent OPEC's monthly oil production in millions of barrels per day as shown on the left scale, while the purple line graph represents global oil production in millions of barrels per day, with the metrics for global output shown on the right scale....
After this month's 80,000 barrel per day increase in OPEC's production from their revised production of a month earlier, OPEC's preliminary estimate is that total global liquids production increased by a rounded average of 300,000 to an average of 101.6 million barrels per day in October, after September's total global output figure was apparently revised up by 700,000 barrels per day from the 100.6 million barrels per day of global oil output that was reported for September a month ago, as non-OPEC oil production rose by a rounded 200,000 barrels per day in October after that revision, with most of October’s non-OPEC production increase due to greater oil output from Norway and the OECD Americas, which more than offset lower production from Russia and Brazil...
After that 300,000 barrel per day increase in October's global output, the 101.60 million barrels of oil per day that were produced globally during the month were only 100,000 barrels per day, or 0.1% more than the revised 101.50 million barrels per day that were being produced globally in October a year ago, when OPEC was operating with an inconsequential 100,000 million barrel per day production cut, after their pandemic era out reductions had unwound in September 2022... (see the November 2022 OPEC report for the originally reported October 2022 details). Since this month's increase in OPEC's output was in line with the global increase, their October oil production of 27,900,000 barrels per day amounted to 27.5% of what was produced globally during the month, same as their revised 27.5% share of the global total in September....OPEC's October 2022 production was originally reported at 29,494,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year produced 1,594,000 barrels per day, or 5.4% fewer barrels per day of oil this October than what they produced last October, when they accounted for 29.1% of a similar global output total...
Even with the increase in global oil output in October and the big aforementioned upward revision to September's production, the amount of oil being produced globally during the month again fell short of the expected global demand, as this next table from the OPEC report will show us...
The above table came from page 27 of the November Oil Market Report (pdf page 37), and it shows regional and total oil demand estimates in millions of barrels per day for 2022 in the first column, and then OPEC's estimate of oil demand by region and globally, quarterly over 2023 over the rest of the table. On the "Total world" line in the fifth column, we've circled in blue the figure that's relevant for October, which is their estimate of global oil demand during the fourth quarter of 2023. OPEC is estimating that during the 4th quarter of this year, all oil consuming regions of the globe will be using an average of 103.28 million barrels of oil per day, which was revised a rounded 150,000 barrels of oil per day higher from the 103.13 million barrels per day they estimated for the fourth quarter a month ago (we've circled this month's revisions in green). But as OPEC showed us in the oil supply section of this report and the summary supply graph above, OPEC and the rest of the world's oil producers were only producing 101.60 million barrels per day during October, which would imply that there was a shortage of around 1,680,000 barrels per day of global oil production during October, when compared to the demand estimated for the month...
In addition to figuring that October oil shortage implied by this report, the upward revision of 700,000 barrels per day to September's global oil output that's implied the data in this month's report, combined with the 60,000 barrels per day downward revision to 3rd quarter demand that we've circled in green above, means that the 1,570,000 barrels per day global oil output shortage we had previously figured for September would now be revised to a shortage of 810,000 barrels per day. In like manner, the 60,000 barrels per day downward revision to 3rd quarter demand means that the shortage of 1,360,000 barrels per day we had previously figured for August would now be revised to a shortage of 1,300,000 barrels per day, and that the shortage of 1,480,000 barrels per day barrels per day we had previously figured for July would have to be revised to a shortage of 1,420,000 barrels per day...
Note that in green we have circled an upward revision of 130,000 barrels per day to OPEC's previous estimate for second quarter demand. So, based on that upward revision to demand, our previous estimate of a shortage of 450,000 barrels per day in June would now be revised to a shortage of 580,000 barrels per day. In addition, the 750,000 barrels per day global oil output shortage we had previously figured for May would now be revised to a shortage of 880,000 barrels per day. Meanwhile, the global shortage of 130,000 barrels per day we had previously figured for April would now be revised to a shortage of 260,000 barrels per day, in light of that 130,000 barrel per upward revision to 2nd quarter demand....
Also note that in green we have encircled a downward revision of 10,000 barrels per day to OPEC's previous estimates of first quarter demand. For March, that means that the 200,000 barrels per day global oil output surplus we had previously figured for March would be revised to a surplus of 210,000 barrels per day. Similarly, the downward revision to first quarter demand means that the global oil surplus of 500,000 barrels per day we had previously figured for February would now be revised to a surplus of 510,000 barrels per day, while the 250,000 barrels per day global oil output shortage we had previously figured for January would now be revised to a shortage of 240,000 barrels per day, in light of the 10,000 barrel per day downward revision to first quarter demand..
Note that in orange we've also circled an upward revision of 30,000 barrels per day to 2022's demand, which also means that the supply shortfalls that we previously reported for last year would need to be revised....while we're not inclined to go back and recompute supply & demand for the months of 2022, we have those totals for each month of last year accompanying our review of OPEC's January 2023 report, should anyone want to review how 2022's oil supply & demand metrics shook out..
note: the above was excerpted from my weekly blog post at Focus on Fracking
Recent comments