We estimate OPEC production rose m/m by 0.25 mb/d to 32.96 mb/d in July. This was the fourth consecutive increase and took output to its highest level in 2017. While the bulk of the gains came from Libya and Nigeria, which are not subject to output quotas, compliance by the other 12 members with the OPEC/non-OPEC deal slipped m/m to 92%, the lowest reading this year.
Libyan production was up m/m by 0.16 mb/d to 0.98 mb/d, the highest since June 2013. Output from the Sirte basin was up as a result of the interim deal between Wintershall and NOC struck in mid-June and few disruptions elsewhere. Libya’s recovery has proved more resilient than we expected and could persist given the tentative political progress being made, including the talks in Paris in late July. But, even if current output levels are sustained, further gains will be hard to achieve from here. Meanwhile, Nigerian production was up m/m by 70 thousand b/d at 1.92 mb/d. The 0.2 mb/d Bonga field was back after 10 days of works in June, but pipeline attacks disrupted Bonny loadings, especially in late July when the Nembe Creek trunk line and the Trans Niger Pipeline were both shut. Nembe Creek reopened on 25 July and the government is taking further steps to appease militant groups to avoid more infrastructure attacks.
Saudi output rose slightly m/m by 10 thousand b/d to 10.08 mb/d (95% compliance)—with exports around 7.1 mb/d, crude burn near 0.7 mb/d, and refinery runs likely at least 2.4 mb/d, we believe supplies to the market were around 10.2 mb/d, as the Kingdom again destocked inventories. Iraq reported a sharp 0.15 mb/d m/m decline in its own output, to 4.40 mb/d, which it attributed to a revised estimate of Kurdish production, so we treat these figures with caution and our assessment is Iraqi production fell only marginally m/m, to 4.47 mb/d (43% compliance).
The average of third party estimates we track reported a larger 0.28 mb/d increase m/m in July, to 32.96 mb/d, with compliance falling to 80%. The main difference was Saudi production, which third parties estimate rose m/m by 80 thousand b/d to 10.14 mb/d (83% compliance). On the other hand, third parties estimate Nigerian output was flat m/m at 1.75 mb/d.
In August and beyond, we expect the gains in Libyan and Nigerian production to slow, even if both countries manage to sustain around current levels. Saudi Arabia has promised to cut exports to 6.6 mb/d in August and is also restricting nominations to Asia for September loading. Recent meetings in St Petersburg and Abu Dhabi have been used to press countries with poor compliance, such as Iraq and the UAE, to up their game. While overall OPEC output is higher than some in the group would wish, the deal is by no means disintegrating.