We estimate that OPEC production fell m/m by 0.17 mb/d to 31.79 mb/d in April, the lowest total since May 2015 (based on the current 14 OPEC members). Compliance with the OPEC/non-OPEC deal reached another record high of 182%.
Iranian production was broadly flat m/m at 3.79 mb/d in April, but US President Trump’s decision on 8 May to reimpose sanctions will have a substantial impact later this year. We expect Iranian exports to fall by 0.4 mb/d, or more, over the next six months as buyers either significantly reduce volumes to try and secure an exemption or struggle to arrange shipping and payments as banks, insurers and other firms avoid transactions involving Iran. Initially Iran will divert unsold oil into storage and potentially some into domestic refineries, but we expect these options to be exhausted by Q4 18, forcing substantial production cuts towards year-end.
Returning to April, Venezuelan output fell by another 40 thousand b/d to 1.41 mb/d (692% compliance). Declines show no signs of slowing and now the disruptions to shipping and blending operations in the Caribbean—as ConocoPhillips seized PDVSA assets to settle an international arbitration judgment—may add to Venezuela’s problems by adding to loading backlogs at Venezuelan ports and potentially causing other creditors to go after oil operations. We now forecast output will fall below 1.3 mb/d by Q4 18 and there are still significant downside risks. Nigerian production also fell m/m by 40 thousand b/d to 1.82 mb/d as several grades faced disruptions, including operational issues with the Trans Forcados pipeline in late March/early April and the shutdown of the 40 thousand b/d Oyo field on 20 April. Scheduled Qua Iboe maintenance in the first week of May will prevent Nigerian output from rebounding this month either. Angolan production declined by another 30 thousand b/d to 1.53 mb/d (283% compliance) and May and June loading programmes point to more losses, so we have cut our estimates for the rest of the year. Saudi Arabia also cut output, by 40 thousand b/d to 9.87 mb/d (139% compliance), as it kept crude exports below 7 mb/d despite peak refinery maintenance.
Saudi output was the main divergence in April’s third-party estimates, which put the Kingdom’s production up by 30 thousand b/d m/m to 9.96 mb/d (120% compliance). Even so, third parties put OPEC production lower m/m by 70 thousand b/d at 31.96 mb/d, raising compliance to 166%.
Iranian, Venezuelan and Angolan losses will further tighten the market, raising prices. We have factored in higher output from Saudi Arabia and other GCC producers late in the year as they react to this, rather than try to pre-empt it. Still, OPEC output averages just 32.08 mb/d in Q4 18.