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)
Short Url
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.


Economic meltdown threatens Europe’s war on plastic waste

Plastic recycling at the Extruplas plant in Portugal. Europe produces 26 million tons of plastic waste each year. (Reuters)
Updated 31 min 56 sec ago

Economic meltdown threatens Europe’s war on plastic waste

  • Lower oil prices mean lower virgin plastic prices — and that spells trouble for the recycling industry

OUREM, Portugal: Giving a new life to plastic trash gets Carlos Bento out of bed every morning. But the coronavirus pandemic has seen revenues drop up to 40 percent at Micronipol, the large recycling facility he runs in central Portugal, and it faces an uncertain future.

Micronipol produces recycled polyethylene, the base for plastic bags and bottles. The product is piling up at its warehouses as clients, facing their own economic struggles, shelve their recycling goals. They are opting for cheaper alternatives: non-recycled plastics made from hydrocarbons.
As lockdowns were put in place worldwide, a drop in demand for oil pushed prices to historic lows, making virgin plastics — already becoming cheaper than the recycled equivalent — even more affordable.
“If we are no longer competitive and if we lose cash we have two options: Either someone has to subsidise us so we can keep working or we have to shut down,” said Bento, as he stood near a pile of colorful recycled plastic bales.
Lower virgin plastic prices could spell disaster for the future of European recyclers like Micronipol.
In Europe, virgin polyethylene terephthalate (PET) was over 7 percent, or €60 ($71) per ton, cheaper than the recycled equivalent last month, data from S&P Global Platts showed.
Industry group Plastic Recyclers Europe said firms in most EU member states have signalled their recycling facilities have reduced their operations or closed their lines for at least a few months.
“Without well-functioning and profitable plastics recycling there is no alternative, no environmentally sound option for plastic waste management,” said Antonino Furfari, the group’s managing director. “This waste will be incinerated or dumped.”
Piotr Barczak, senior policy officer for waste at the European Environment Bureau, called for a tax on all virgin plastics to eliminate the price gap.
The impact of the pandemic on recyclers is especially concerning at a time when consumption of plastics is expected to double to 600 million tons per year in the coming two decades, according to a report by Zero Waste Europe NGO. And as countries struggle to cope with the economic impact of the health crisis, fears abound that environmental policies are being left behind.

HIGHLIGHTS

● Virgin plastic cheaper than recycled alternative.
● European plastic recyclers struggling to stay afloat.
● Taxing virgin plastic could help industry survive.

EU Environment Commissioner Virginijus Sinkevicius told Reuters in a written interview that while the Commission had received relatively few requests for extensions or exemptions from EU environmental rules due to the pandemic, the crisis had a “significant impact” on countries’ administrative capacities.
The EU is to ban a range of single-use plastic items by 2021, a huge ambition which could now be under threat as more and more consumers and restaurants become more dependent on disposable plastic products due to contagion fears.
Portugal’s Environment Secretary of State Ines dos Santos Costa said her government’s ambition to cut disposable plastic products “still stands,” but the pandemic has transformed models of production and consumption worldwide.
Not far from Portugal’s capital Lisbon, recycling sorting facility Amarsul has raised concerns about the vast amounts of plastic gloves and masks it has been receiving.
“If the habit of using disposables continues, we may take a step back we will have to fix later,” said CEO Sandra Silva, adding that a recycling-based economic model “cannot stop because there is a pandemic.”
Europe generates 26 million tons of plastic waste annually, but less than 30 percent of that is collected for recycling. Experts say existing targets to improve plastic recycling could be in danger of not being met.
Sandra Castro, head of Extruplas firm that makes wooden-like outdoor furniture from plastics it recycles, is hoping the current situation is no more than a temporary bump in the road.
“We need the industry to be able to provide a solution to the waste we produce,” Castro said.
But for Sirpa Pietikainen, Finnish member of the European Parliament, the only way to tackle plastic pollution, which some scientists say is fueling climate change through greenhouse gas emissions, is to produce less waste.
“If you thought the coronavirus crisis was bad for the economy, climate change will be 100 times worse — and then you will not only talk about losing GDP points, you will talk about access to medication, water and food,” she said.
“We really need to act now.”