We estimate that OPEC production went up m/m by 0.48 mb/d to 32.96 mb/d in August, higher y/y by just 20 thousand b/d. Nevertheless, compliance with the OPEC/non-OPEC deal was down only marginally, to 112%, from 119% in July, because most of the output gains came from producers (namely Libya and Nigeria) unbound by the OPEC/non-OPEC deal. Compliance excluding Venezuela fell to a record low of 47% in August, compared with 57% in July.
Libya recorded the largest m/m production increase, with output growing by 0.30 mb/d to hit 0.95 mb/d. After General Khalifa Haftar yielded control over the eastern terminals to the NOC in July, the authorities were able to ramp up output despite some minor hiccups. Nigeria also logged higher output (+80 thousand b/d m/m to 1.85 mb/d) in August, as the country continued to benefit from the end of loading disruptions in June. Iraq hiked output for the fifth month in a row, with production up m/m by 70 thousand b/d to reach 4.55 mb/d thanks to capacity increases at multiple oilfields. Saudi Arabia recorded a modest m/m increase of 40 thousand b/d, with output at 10.50 mb/d (9% compliance), as high OSPs deterred buyers, following which OSPs were reduced in September. We expect September supplies to have risen to around 10.7 mb/d. Finally, output in Angola was up m/m by 40 thousand b/d at 1.47 mb/d (360% compliance), after the Kaombo project finally began, offsetting the steep declines recorded at the country’s other offshore fields, a trend we see continuing as Kaombo gradually ramps up production.
Iran’s output fell m/m by 0.11 mb/d to 3.67 mb/d, as falling exports started to dent production, even though some of the lost exports were stored in onshore tanks. Venezuela recorded a further m/m loss, this time by 30 thousand b/d to 1.26 mb/d (849% compliance), as the production decline continued due to familiar upstream/loading problems. A late-August incident at the Jose terminal means these problems will likely intensify in September.
The average of third-party estimates we collect shows OPEC output rising m/m by 0.30 mb/d to 32.71 mb/d in August, with compliance rising to 122% (from 120% in July). The main difference was their estimate of a m/m decline of 10 thousand b/d in Angolan output to 1.46 mb/d.
We expect OPEC production to fall over the next three months, as US sanctions force most buyers of Iranian crude to reduce their purchases to zero and Tehran cuts production further after running out of storage, both onshore and offshore. Likewise, problems in Venezuela are unlikely to end any time soon, thus continuing to erode output despite the regime’s latest initiatives to improve operating conditions for IOCs.