We estimate OPEC crude production rose m/m by 20 thousand b/d to 29.73 mb/d in August. The y/y decline grew to 2.60 mb/d, as by August 2018, various producers in the Middle East were significantly ramping up their output in anticipation of US sanctions on Iran. Compliance with the OPEC+ agreement fell m/m to 108% due to higher production from countries with quotas.
Nigerian production rose m/m to 1.95 mb/d in August (-400% compliance). Nigerian exports hit the highest since December 2015 as exports of the new Egina grade reached 0.23 mb/d. The Reformed Niger Delta Avengers recently threatened attacks on Nigerian oil infrastructure, but it is not yet clear if this new group has the capability to carry out the types of attack that reduced Nigerian output to below 1.5 mb/d at times in 2016. Iraqi production also rose m/m, by 50 thousand b/d to 4.74 mb/d in August (-62% compliance), with output at Eni’s Zubair field reaching its phase 1 target of 0.5 mb/d. The Iraqi and Nigerian oil ministers have both recently stated to increase compliance, likely following pressure from Saudi Arabia. But we doubt this will translate into materially lower production. Over September to December, we forecast Iraqi and Nigerian output will average 4.73 mb/d and 1.94 mb/d, respectively.
The biggest decline in August was in Iranian production, lower m/m by 70 thousand b/d to just 2.11 mb/d. Iranian oil loadings fell below 0.2 mb/d and most available storage capacity is now full, forcing more production shut-ins. There is speculation that Donald Trump is considering easing US sanctions on Iran in order to secure a meeting with Hassan Rouhani, but we still see significant barriers to a major policy change. Our balances do not anticipate any imminent loosening of restrictions, so we forecast Iranian crude production will fall to 1.9 mb/d in Q4 19.
The average of third-party estimates we collect shows OPEC production rose m/m by 0.11 mb/d to 29.78 mb/d (123% compliance). The main difference from our figures is that third parties show Saudi output rising by 60 thousand b/d to 9.75 mb/d (374% compliance), influenced by Saudi statements and direct communication that we believe understated July output at 9.58 mb/d, before it recovered in August. We see output flat m/m at 9.83 mb/d (249% compliance).
We expect OPEC production to fall m/m in September to around 29.6 mb/d, on further Iranian losses and a small reduction in Saudi output. Our balances factor in a small increase in Q4 19 OPEC production, to around 29.9 mb/d. This assumes a modest increase in Saudi production—a response to potentially higher demand from customers following autumn refinery maintenance, rather than a shift in policy. We see no shift in Saudi oil policy from the change in energy minister and so the Kingdom will continue to overcomply with its quota (10.31 mb/d).