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OPEC+ countries announced their intention to extend their
current production cuts of 9.7 million b/d for at least another
month. Some producers have made deeper cuts than those agreed,
while the compliance from Iraq, Angola, Nigeria and Kazakhstan has
been rather poor. All did not reach their full commitment in May
and June, and will have to compensate between July and September.
Russia now predicts a shortage in the oil market in July, with the
country's Energy Minister Alexander Novak expecting this shortfall
to be between three and five million b/d. Overall, compliance
reached 89% in May, with Iraq standing only at 42% of
compliance.
Russian seaborne exports of crude oil marginally fell below four
million b/d in May, with volumes coming down 15% month-on-month and
21% year-on-year. Shipments from both the Black Sea and the Baltic
declined by around a quarter versus April. Seaborne flows from the
Russian far east haven't been affected.
Crude oil flows from Russia Black Sea and Baltic Sea have been
primarily targeting European destinations, but the volumes have
remained close to two million b/d during the last couple of months,
with demand having been sharply affected by COVID-19 and the
general lockdown in most of the continent. Meanwhile, flows to
China and the rest of Asia increased quickly in April, a trend
which didn't last for long, with May flows not surpassing volumes
shipped in first quarter of 2020.
Focusing on shipping, Aframaxes have been hit by the decline in
Russian crude oil production cuts, with shipments on the size class
(including dirty LR2) down by 23.5% month-on-month in May.
This has strongly affected employment for Aframax/LR2 in the
continent, with the spread between laden and ballast units dropping
to the lowest observed in last year, primarily due to the much
lower cargoes to pick up from Russia.
Russian flows to European destinations have been supported by
Libya's absence as the country's production and exports of crude
oil have collapsed since February. The civil conflict and the
ongoing battle to determine which side will ultimately control the
country's oil hasn't allowed Libya to recover and start exporting.
However, its largest oilfield resumes production. El-Sharara
oilfield can produce more than 300,000 barrels of crude oil per
day.
The oilfield resumed production on Sunday, according to the
National Oil Corporation (NOC), after long negotiations.
Az-Zuwaytinah port was closed earlier this year by Khalifa Haftar's
militia. Production will start at El Sharara with a capacity of
30,000 per day which could approach full capacity (above 300,000
b/d) within 90 days. This is roughly one third of the country's
production. A complete restart at El Sharara and other oilfields
could add nearly 400,000 b/d of production, while OPEC+ targets to
keep production and exports as low as possible.
Posted 08 June 2020 by Fotios Katsoulas, Liquid Bulk Principal Analyst, Maritime, Trade & Supply Chain, S&P Global Market Intelligence
