The complexity of OPEC compliance

One of the biggest conundrums of the OPEC / NOPEC production cut from a ClipperData perspective is that no sooner does a producer appear to be showing compliance via lower exports, lo and behold, volumes rebound.

Some producers have been fairly consistent in their discipline, barring a few blips (bravo, Saudi), while others stand on the sidelines, looking in the other direction (here’s looking at you, Iraq).

But the overarching theme is that a combination of reckless abandon at the end of last year (in terms of higher exports) and the lack of a unified effort to cut crude hitting the global market this year has meant OPEC still remains a country mile away from achieving its goal of lowering global inventories. Hark, a couple of insights on the matter:

Last month we highlighted how UAE was finally exhibiting signs of compliance. ADNOC gave a heads-up earlier in the year that scheduled maintenance would be undertaken for its Murban grade in March, and for Das in April, reducing production and exports of both.

True to its word, we saw Murban exports drop in March to the lowest level since at least 2012, while Das export loadings in April dropped to an 8-month low. There’s the rub, however. Exports of Murban rebounded in April, and are even higher in May thus far. As for Das, it too is rebounding after ebbing last month:

 

Das and Murban May 2017.jpg

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As OPEC put the pedal to the metal at the end of last year, pushing out as much crude onto the global market as it could before th

As OPEC put the pedal to the metal at the end of last year, pushing out as much crude onto the global market as it could before the production cut deadline, flows of OPEC crude into the U.S. in January reached their highest level since the summer of 2013 (when domestic production was only 7.5 million barrels per day!!).

Despite expectations for lower flows in the months following, we have seen OPEC exports to the U.S. averaging nearly 3.4mn bpd for February, March and April – which is 9 percent above year-ago levels, and up 28 percent versus 2015. Imports so far in May are holding up, currently at 3.4mn bpd, just a smidge below year-ago levels.

But with the latest OPEC meeting fast approaching, Saudi Arabia cut its exports last month to the lowest level since late 2015. This means less crude will be arriving in the U.S. from the OPEC kingpin into June.

OPEC to US May 2017 ClipperData.jpg

Finally, Libya and Nigeria are another layer to the onion of OPEC production cut complexity. Libyan production has been estimated above 800,000 bpd in recent weeks, although it is currently experiencing supply hiccups. Given low domestic consumption, this rise in output is working its way into higher exports fairly swiftly, up to 550,000 bpd this month.

As for Nigeria, exports this month are at their quickest pace so far this year. Exports were already strong, but are further being bolstered by the first loading of Forcados at its SBM since November, as the Trans Forcados export pipeline gets up and running again: over a million barrels were loaded there on Wednesday.

Nigeria Libya exports May 2017.jpg

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