We estimate that OPEC production fell m/m by 0.36 mb/d to 30.59 mb/d in February. In y/y terms, output was down by 1.3 mb/d. Compliance with the new OPEC+ deal jumped to 90% from 56% in January as Saudi Arabia, the UAE, Iraq, Kuwait significantly cut output.
Saudi Arabia once more logged the biggest cut, as it continues to overcomply with the OPEC+ deal. Production fell by 0.10 mb/d m/m to 10.1 mb/d (166% compliance) in February and we expect it to fall to 9.8 mb/d in March. In Iraq, production fell m/m by 90 thousand b/d to 4.51 mb/d (101% compliance), though this was largely due to a week-long interruption to Kirkuk flows to the Ceyhan terminal due to maintenance. Kuwait continued to cut output to comply with the OPEC+ deal, with production down m/m by 60 thousand b/d to 2.72 mb/d (105% compliance), while Iran production fell m/m by 50 thousand b/d to 2.6 mb/d despite a slight uptick in exports. US sanctions on Venezuela started to take a toll on production in the latter, which dropped m/m by 50 thousand b/d to 1.2 mb/d. The decline was fairly limited, as the authorities moved considerable volumes into onshore and floating storage. However, we expect output to collapse to 0.66 mb/d in March as a result of a week-long blackout in mid-March and as storage capacity hits its limit. Despite OPEC’s rising spare capacity, core Middle Eastern producers will struggle to offset the loss of heavy crude from Venezuela as most of their additional volumes are in light grades. In Nigeria, output was down m/m by 30 thousand b/d to 1.88 mb/d, still above its OPEC+ baseline (i.e. negative compliance).
The only country to record a m/m increase was Libya, where production rose by 30 thousand b/d to 0.77 mb/d, as the end of the January weather-related disruptions at the country’s main terminals boosted exports and output. We forecast that in March output will grow to 0.92 mb/d, after NOC officially resumed operations at the 0.30 mb/d Sharara oilfield.
The average of third-party estimates we collect shows OPEC output falling m/m by 0.28 mb/d to 30.65 mb/d in February. The main difference with our estimates was m/m flat Iranian production, in contrast with our estimate of a decline.
We expect total OPEC production to fall to 30.49 mb/d in Q1 19, down from 32.04 mb/d in Q4 18. Output will then decline further to 30.38 mb/d in Q2 19, as the core Middle Eastern producers within OPEC continue to overcomply with the production deal to rebalance the markets. Outside of the OPEC+ deal, we also expect the political crisis in Venezuela to continue, thus contributing to lower production, only partially offset by recovering Libyan output.