However, the export pattern does not reflect a similar trend in production. Despite rising exports, we believe total OPEC+ crude and condensate production remained stable during the month due to reduced domestic demand, particularly from Russia. We view total OPEC+ demand as down by nearly 600 kbd, half of which came from Russia, where EU sanctions on products are starting to hit refining activity, impacting the country’s production as well. Alexander Novak, the country’s oil minister, had announced that Russia would reduce output by 500 kbd, a move we had anticipated, albeit a month earlier.
Saudi oil demand was also down by 120 kbd due to maintenance and a slow ramp-up in operations at Jizan. This, alongside a production boost, allowed exports to bounce by 250 kbd and finish slightly above the 7 Mbd threshold in the month. The main increase was seen in shipments to China, which were up by 280 kbd m/m to close to 1.7 Mbd. Nevertheless, total country exports are still weak compared to Q4 2022 where they averaged 7.36 Mbd. We believe this could be a balancing game for Riyadh as it waits for clearer signals ahead around Chinese demand and Russian production. For now, OPEC+ members seem satisfied with the current price behaviour, as it prevents demand destruction and new investment from competitors whilst also being sufficiently high to secure most governments’ fiscal budgets.
Iraq’s Basrah oil exports have jumped 213 kbd m/m to 3.35 Mbd, a four-month high, likely spurred by attractive Basrah oil pricing. The increase was split roughly half-half between Asian and European clients. SOMO boosted exports to India by 60 kbd m/m, a market where Russian competition is now at its height, with an average of 1.4 Mbd of Russian oil shipped there ytd. Adding KRG oil exports into the mix would add another 127 kbd to Iraq’s total oil exports in February. Exports of KBT quickly recovered after the deadly earthquake in southern Turkey hit loading operations at Ceyhan for a few days. At levels above 500 kbd, KBT loadings hit their highest since December 2020. We expect Basrah oil exports to decline in March, however, due to maintenance at Lukoil’s 400 kbd West Qurna 2 field.
Seaborne exports hit their highest level since February 2022
Elsewhere, Nigeria and Libya managed substantial gains, increasing their oil exports of 137 kbd and 135 kbd, respectively. Nigeria’s oil operations seem to have improved much since mid-2022 where production fell to nearly 1.2 Mbd and exports to 1.1 Mbd. Exports have risen ever since and reached 1.6 Mbd in February, the highest level since November 2021. This backdrop of improving production and exports comes as the country is currently in the midst of the most highly contested presidential election since the end of the country’s military dictatorship in 1999, mainly benefiting Europe, where flows have increased to 754 kbd, up 183 kbd m/m. That said, despite the recent improvements, we believe there is minimal upside from now on in the country in terms of output.
Libya shares many common points with Nigeria on the oil front. It is another OPEC member which is expected to undertake crucial presidential elections, albeit these have continuously been pushed back since 2018. We also believe that exports from the country do not have much upside left as they averaged 1.15 Mbd in February, near the 1.2 Mbd level that appears like the country’s maximum production capacity. Finally, like Nigeria, increased flows out of Libya have mainly benefitted Europeans, particularly the traditional MED and Central European refiners. Exports to the MED were up 170 kbd on the month (including Trieste). However, a narrowing Brent-Dubai EFS spread and Asian refiners increasingly looking for light oil have also pushed more Libyan barrels to China, as exports to the Eastern Asian country were up by 50% to 150 kbd.
Easing US crude bound for Europe has opened the way for Nigeria's and Libya's light oil
Following President Raisi’s state visit to President Xi, Iranian oil exports are on track to reach back levels of 1.2-1.3 Mbd witnessed in November and December. Indeed, we are currently estimating Iran’s oil exports at 1.1 Mbd for February, a very high number given the fact that our estimate regarding Iran usually only improves a couple of weeks after the month ends. This, together with increased shipments of Russian oil to China, could be interpreted as another sign of improving Chinese demand.
Unlike KBT, loadings of Azerbaijani crude were hampered for a longer time at Ceyhan, leading to a decline of 100 kbd from the country in February, despite a restart of loading operations at the Georgian port of Supsa on the Black Sea for the first time since April 2022. Azerbaijan’s exports should recover in March provided no further halting at Ceyhan’s operations. The country’s output will also benefit from the 100 kbd Azeri Central East platform, which will come online in April and push country production to beyond 700 kbd, according to our books.
CPC loadings also took a hit due to weather storms resulting in multi-days halts in the month, the most considerable disruption in more than a year. This weighed on Kazakhstan’s oil exports which fell by 260 kbd to 1.11 Mbd. With more temperate weather in the coming weeks, Kazakhstan could lead OPEC+ in oil export growth this month.
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