We estimate that OPEC production fell m/m by 0.14 mb/d to 32.58 mb/d in October, lower y/y by 0.43 mb/d due to the high base in Q4 16. This raised compliance with the OPEC/non-OPEC production deal to 118%, the highest level since May.
Iraq led the declines, with output lower m/m by 0.11 mb/d at 4.36 mb/d (96% compliance) due to disruptions after Baghdad retook control of various fields around Kirkuk from the Kurds. While exports from southern Iraq rose m/m by around 0.11 mb/d, we believe there was little increase in underlying production. Around 0.25-0.30 mb/d of production remains offline and Baghdad and Erbil appear unwilling to start negotiations for a new export and revenue deal, so the disruption could extend into 2018. Nigerian output fell m/m by 0.10 mb/d to 1.84 mb/d curtailing exports amid another Bonny Light force majeure—upstream maintenance is likely to cap exports and production in November as well. Venezuela’s financial crisis deepened as S&P declared the country was in selective default as Caracas attempts to restructure debts. We have revised down our estimates of Venezuelan output again, as exports remain extremely low, and now see output at 1.78 mb/d in October (lower m/m by 40 thousand b/d, 302% compliance). Algerian output also fell m/m by 40 thousand b/d to 1.00 mb/d (178% compliance) due to planned maintenance on the 60 thousand b/d El Merk field that has extended into November.
Other members increased production. Saudi output rose m/m by 80 thousand b/d to 10.06 mb/d (100% compliance) as the 0.4 mb/d Abqaiq field returned from maintenance boosting exports above 7 mb/d again. Angolan production rose m/m by 30 thousand b/d to 1.69 mb/d (78% compliance) and exports hit the highest level since March 2016. Libyan production also rose m/m by 60 thousand b/d to 0.98 mb/d, with the 0.3 mb/d Sharara field open for most of the month. But the 50 thousand b/d As Sarah field in central Libya was shut at the start of November and remains offline. Meanwhile, a new oil-fired power plant could consume 30-50 thousand b/d of crude from Sharara when it starts in late November, cutting export volumes.
The average of third-party estimates we collect shows OPEC output fell m/m by 0.15 mb/d to 32.62 mb/d (103% compliance), with Venezuela at 1.89 mb/d (-30 thousand b/d m/m).
OPEC production looks unlikely to improve in November given the ongoing disruptions to Iraqi output and upstream maintenance in the Middle East and West Africa. OPEC crude exports may rise in Q1 18 in tandem with heavy refinery maintenance unless producers choose to scale back output. Meanwhile, we still expect OPEC to extend the production deal beyond March 2018, but the recent price rally could complicate the timing of the announcement.