OPEC July oil output surges as Gulf voluntary cuts end

An easing of lockdowns and lower supply have helped oil prices to climb above $40 from April’s 21-year low of below $16 a barrel. (Reuters)
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Updated 01 August 2020

OPEC July oil output surges as Gulf voluntary cuts end

  • Lockdown easing and lower supply have helped rise, although second wave concerns keep lid on gains

LONDON: OPEC oil output has risen by more than 1 million barrels per day (bpd) in July as Saudi Arabia and other Gulf members ended their voluntary extra supply curbs on top of an OPEC-led deal, and other members made limited progress on compliance.
The 13-member Organization of the Petroleum Exporting Countries pumped 23.32 million bpd on average in June, the survey found, up 970,000 bpd from June’s revised figure, which was the lowest since 1991.
OPEC and allies agreed in April to a record output cut as the coronavirus crisis hammered demand.
An easing of lockdowns and lower supply have helped oil to climb above $40 from April’s 21-year low of below $16 a barrel, although concerns of a second wave are keeping a lid on gains.
“Upside potential will continue to be in short supply so long as the COVID hangover lingers,” said Stephen Brennock of oil broker PVM.
OPEC, Russia and other producers, a group known as OPEC+, agreed to cuts of 9.7 million bpd, or 10 percent of global output, from May 1.
OPEC’s share, to be made by 10 members from October 2018 levels in the case of most countries, is 6.084 million bpd.
In July, they delivered 5.743 million bpd of the pledged reduction, equal to 94 percent compliance, the survey found. Compliance in June was revised up to 111 percent.
July’s increase is the biggest since April, when OPEC briefly pumped at will before the latest supply cut was agreed.

HIGHLIGHTS

• Record OPEC+ oil supply cut took effect on May 1.

• Saudi Arabia boosts supply close to quota levels.

• Easing lockdowns help oil climb above $40.

To further support the market, Saudi Arabia, Kuwait and the UAE had pledged to cut by an extra 1.18 million bpd in June only.
This helped to curb output last month to OPEC’s lowest since 1991, excluding membership changes, based on Reuters surveys and OPEC figures.
The biggest rise in supply in July came from Saudi Arabia, which pumped 8.4 million bpd, up 850,000 bpd from June and close to its quota, the survey found.
The UAE and Kuwait also boosted output close to their targets. Iraq and Nigeria, which boosted compliance in June and were laggards in previous OPEC+ deals, did not make any further cuts in July, the survey found, with Iraq boosting exports. Both have pledged to make additional reductions in
later months. “The low prices are making life difficult for those OPEC countries that are required to cut their production additionally,” said Eugen Weinberg, analyst at Commerzbank.
Iranian and Libyan supply held steady in July and Venezuelan output dropped further. All three are exempt from voluntary cuts because of US sanctions or internal issues limiting output. Libyan output has plunged since January due to a blockade of ports and fields by groups loyal to eastern-based commander Khalifa Haftar.
The Reuters survey aims to track supply to the market and is based on shipping data provided by external sources, Refinitiv Eikon flows data, information from tanker-trackers such as Petro-Logistics and Kpler, and information provided by sources at oil companies, OPEC and consultants.


Oil giants’ production cuts come to 1m bpd as they post massive write-downs

Updated 10 August 2020

Oil giants’ production cuts come to 1m bpd as they post massive write-downs

  • Crude output worldwide dropped sharply after the market crashed in April

LONDON: The world’s five largest oil companies collectively cut the value of their assets by nearly $50 billion in the second quarter, and slashed production rates as the coronavirus pandemic caused a drastic fall in fuel prices and demand.

The dramatic reductions in asset valuations and decline in output show the depth of the pain in the second quarter. Fuel demand at one point was down by more than 30 percent worldwide.

Several executives said they took massive write-downs because they expect demand to remain impaired for several more quarters as people travel less and use less fuel due to the ongoing global pandemic.

Of those five companies, only Exxon Mobil did not book sizeable impairments. But an ongoing reevaluation of its plans could lead to a “significant portion” of its assets being impaired, it reported, and signal the elimination of 20 percent or 4.4 billion barrels of its oil and gas reserves.

By contrast, BP took a $17 billion hit. It said it plans to recenter its spending in coming years around renewables and less on oil and natural gas.

Weak demand means oil producers must revisit business plans, said Lee Maginniss, managing director at consultants Alarez & Marsal. He said the goal should be to pump only what generates cash in excess of overhead costs.

“It’s low-cost production mode through the end of 2021 for sure, and to 2022 to the extent there are new development plans being contemplated,” Maginniss said.

London-based BP has previously said it plans to cut its overall output by roughly 1 million barrels of oil equivalent (BOEPD) by the end of 2030 from its current 3.6 million BOEPD.

Of the five, Exxon is the largest producer, with daily output of 3.64 million BOEPD, but its production dropped 408,000 BOEPD between the first and second quarters. The five majors, which include Chevron Corp, Royal Dutch Shell and Total SA, also cut capital expenditures by a combined $25 billion between the quarters.

Crude output worldwide dropped sharply after the market crashed in April. The Organization of the Petroleum Exporting Countries agreed to cut output by nearly 10 million barrels a day to balance out supply and demand in the market.