We estimate that OPEC production rose m/m by 0.15 mb/d to 32.03 mb/d in June, but was lower y/y by 0.67 mb/d. Compliance with the OPEC/non-OPEC deal was down to 124%, from 161% in May. Compliance excluding Venezuela fell to a record low of 69%, compared with 112% in May. Congo joined OPEC on 22 June and will be included in our balances from next month. We estimate the production in Congo was around 0.30 mb/d in June.
Saudi Arabia was the main driver of the increase in production, as its output went up m/m by 0.46 mb/d to 10.49 mb/d (11% compliance). Under pressure from the US administration, the Saudi authorities hiked production ahead of the 22 June OPEC meeting to offset the impact of losses from Venezuela and anticipated losses from Iran. Saudi Arabia also played a key role in pushing OPEC to agree to an increase in output, despite fiery resistance from Iran and Venezuela. Iraq also raised output m/m, by 40 thousand b/d to 4.45 mb/d (53% compliance), as its loading facilities in the south operated throughout the month near full capacity. The UAE and Qatar increased output m/m by 10 thousand b/d, taking production to 2.90 mb/d (81% compliance) and 0.61 mb/d (127% compliance), respectively. Following OPEC’s agreement to raise production, we expect these two countries to further boost output in the next few months.
Libya registered the biggest output losses, with production falling m/m by 0.27 mb/d to 0.68 mb/d, because clashes around the Es Sider and Ras Lanuf terminals led the NOC to declare force majeure in mid-June. Losses continued in July as political tension between the NOC and General Khalifa Haftar led to the closure of all east Libyan terminals for the first 10 days of July, but the terminals have since reopened. Angola’s output declined m/m by 70 thousand b/d to 1.45 mb/d (386% compliance) as natural declines continued to undermine production. Finally, production in Venezuela dropped m/m by 40 thousand b/d to 1.35 mb/d (755% compliance) as operational problems continued to undermine both upstream and loading activities.
The average of third-party estimates we collect shows OPEC output rising m/m by 0.13 mb/d to 32.01 mb/d in June, lowering compliance to 126%. The average based on third-party estimates shows a m/m decline of 40 thousand b/d in Iranian output to 3.78 mb/d, in contrast to our estimate of flat production in June.
We expect OPEC production to increase over the next few months as Middle Eastern producers boost output well before Iranian production starts to drop off, which we only expect from September onwards. The steep decline in Iranian output comes in Q4 18 and we expect Iranian exports to decline by 1.6 mb/d by year-end vs May levels.