Will OPEC+ Ever Rein In Its Non-Compliant Members?
OPEC and the OPEC+ group have had reasons to be happy this week as Brent oil prices topped $87 per barrel. But the most recent rise in oil is no thanks to the OPEC+ members that have continuously failed to comply with their production cuts. The price rally was the result of signs of strong demand and concerns about supply during the hurricane season. The overproduction at some OPEC+ members – most notably Iraq, Kazakhstan, and Russia – continues to be an issue for the alliance, which has tentative plans to start easing part of the voluntary cuts in the fourth quarter of this year, market conditions permitting. OPEC’s top producer and de facto leader, Saudi Arabia, seeks to lead by example and continues to stick to its pledge to pump 9 million barrels per day (bpd) of crude. But other OPEC+ producers, including OPEC’s second-largest, Iraq, haven’t complied with the current cuts despite continuously pledging they would show better discipline going forward. OPEC has given the cheaters until September 2025 to compensate for their overproduction in recent months. There haven’t been any signs that Iraq and Kazakhstan have managed to reduce their respective output down to their assigned quotas, let alone compensating for previous overproduction. The lack of compliance at some OPEC+ members signals that the years-long struggle of the group to rein in the cheaters isn’t over yet. It also sends a bearish signal to the oil market – some of the production cuts are only on paper because several producers are failing to cut output as much as they have agreed under the OPEC+ deal. Currently, the main culprits are OPEC’s number-two producer Iraq and non-OPEC producer Kazakhstan. And this is not the first time have failed to comply. In the 2020-2021 period, Iraq and Kazakhstan were pumping above their quotas, and they failed miserably in compensating for their overproduction a year after OPEC+ launched a compensation mechanism similar to the one it has now. The backlog of additional cuts that Iraq and Kazakhstan had to make in 2021 increased at that time, more than a year after the compensation plans were adopted, according to internal OPEC+ documents obtained by Bloomberg. This year, compensation plans have been prepared again for Iraq and Kazakhstan. Between January and March 2024 alone, Iraq’s cumulative overproduction stood at 602,000 barrels per day (bpd) and Kazakhstan had accumulated 389,000 bpd in overproduction, per OPEC’s estimates. At the June OPEC+ meeting, producers were given time until September 2025 to compensate for previous overproduction. Judging from the most recent production data from OPEC and from Reuters and Bloomberg surveys, neither Iraq nor Kazakhstan has managed to reduce production to the promised levels. The monthly Reuters survey showed this week that OPEC’s oil production rose in June for a second month in a row, due to higher output from Nigeria and Iran. The biggest decline in output came from Iraq, which reduced production by 50,000 bpd, but OPEC’s second-largest producer continued to exceed its OPEC+ quota in June. Iraq, which has failed to stick to its 4-million-bpd cap on production, pumped 4.195 million bpd in May—down by 7,000 bpd from April, but nearly 200,000 bpd above its target, per OPEC’s secondary sources in its latest monthly report. The Bloomberg survey of OPEC output in June showed that Iraq cut production by 30,000 bpd, but was still around 250,000 bpd above its quota. This is before factoring in the compensation cuts. Kazakhstan, for its part, raised its oil production in June, exceeding its quota, Reuters calculations based on data from sources showed this week. Kazakhstan produced 1.538 million bpd of crude last month, up from May, and about 70,000 bpd above its OPEC+ cap of 1.468 million bpd, according to Reuters calculations of output data. Kazakhstan’s Energy Ministry said in June that independent sources approved by OPEC+ found that the country had exceeded its quota under the deal by 45,000 bpd in May. “Kazakhstan will address this overproduction and will fully comply in June, including complying with additional voluntary cuts,” the ministry said last month. Russia also vowed to reach its oil production quota in June after exceeding its target output under the OPEC+ deal in May, its energy ministry said last month. While OPEC+ has started to publicly announce overproduction levels of individual members, it’s not certain that it could get cheaters that haven’t complied with the cuts for years to begin sticking to their quotas. Continued overproduction could blunt the impact of the group’s cuts on the oil market.
CNG Vehicle Registrations In Mumbai Rise 37% In A Year, Surpass Pre-Covid Levels
There has been a 37% rise in annual registrations of Compressed Natural Gas (CNG) vehicles in Mumbai, with numbers jumping from 22,305 vehicles in 2022-23 to 30,548 in 2023-24. Moreover, for the fisrt time ever, the state, too, boasts of having an annual registration of over 0.2 million CNG vehicles, reveals latest statistics procured by Sunday Mumbai Mirror. Across Maharashtra, the growth in registrations has been 32% during last financial year. Public policy (transportation) analyst Paresh Rawal said, “CNG is a non-renewable source of energy, but comparatively much cleaner than petroleum products. The rise in sales of vehicles can be attributed to various reasons. One is, easily accessible infrastructure of CNG refuelling stations in the city and on highways. Another reason is that company-fitted CNG tanks in newer car models occupy much less boot space and provide a petrol-equivalent thrust to the car. All these reasons, along with better mileage performance, has made CNG cars favorite again. Also, in case of emergency, the option of switching over to petrol/diesel gives it an edge over electric vehicles.”
Qatar continues to drive Middle East’s international LNG trade flow: IGU
Qatar continues to drive the Middle East’s international LNG trade flow, Asia in particular, according to the International Gas Union. In its latest report, IGU noted that the LNG trade flow between the Middle East and Asia accounted for 43.29mn tonnes in 2023, driven by Qatar LNG supplies to China, India and Pakistan. In 2023, global LNG trade flows remained concentrated within Asia Pacific, with Asia Pacific-to-Asia Pacific trade flows having the highest absolute value (95mn tonnes). The third largest trade flow was from the Middle East to Asia at 43.29mn tonnes last year, as compared to 41.25mn tons in 2022, which was a 4.93% or 2.03mn tonnes increase. Major contributors to this trade flow include Qatar to China (16.75mn tonnes), Qatar to India (10.92mn tonnes), and Qatar to Pakistan (6.32mn tonnes).The biggest contributors to the net increase were Qatar to China (+0.70mn tonnes), UAE to China (+0.56mn tonnes), and Qatar to India (+0.37mn tonnes). In 2023, inter-regional trade continued to be dominated by long-term imports, with 61.1% of net imports on the long-term, 3.8% on the short-term and 35.2% on spot. Asia and Asia Pacific remained heavy on long-term imports, with 68.9% and 69.5% of net imports on the long-term, whereas net imports on spot were only 28.2% and 27.2%, respectively. This is consistent with purchase patterns of major players in Asia and Asia Pacific that have historically preferred long-term contracts, with spot purchases being more opportunistic depending on prevalent prices and short-term demand. Europe has mostly purchased on the spot market, corresponding to about 48.4% of net imports, with only 46.4% on long-term. This is consistent with European purchase patterns as spot cargoes were required to make up for an abrupt loss in Russian pipeline flow. Latin America purchases most of its cargoes in preparation for winter in the Southern Hemisphere, of which 65.5% of net imports are on the spot market, while long-term purchases are at 34.5%.According to IGU, intra-Asia Pacific flows were made up primarily of flows coming from Australia, which contributed to 54.75mn tonnes. The most dominant intra-Asia Pacific trade flow was Australia-to-Japan (27.61mn tonnes), then followed by Australia-to-South Korea (10.74mn tonnes) and Malaysia-to-Japan (10.43mn tonnes). Intra-Asia Pacific trade flows declined by 2.1mn tonnes from 2022 to 2023. There were several notable increases from Australia to Thailand (+1.32mn tonnes), intra-Indonesia flows (+0.88mn tonnes), Malaysia to South Korea (+0.69mn tonnes). However, contributing to a slight net decrease was Australia to Japan (-3.11mn tonnes), Malaysia to Japan (-1.58mn tonnes) and Australia to South Korea (-1.08mn tonnes). The second largest trade flow between two regions was from North America to Europe at 56.63mn tonnes . The biggest drivers of this trade flow were from the US to the UK (8.81mn tonnes), the US to Spain (5.32mn tonnes) and the US to Germany (4.14mn tonnes). This trade flow remained almost constant year on year, mainly driven by the US to Netherlands (+4.95mn tonnes), the US to Germany (+4.14mn tonnes), and the US to Italy (+1.62mn tonnes). There were also decreases along this trade route, particularly the US to Spain (-3.12mn tonnes), the US to France (-1.14mn tonnes), and the US to Turkiye (-1.13mn tonnes).