CEM Report, Lagos
Total OPEC -13 preliminary crude oil production averaged 24.19 mb/d in May, lower by 6.30 mb/d m-o-m according to OPEC Monthly Oil Report released Wednesday.
OPEC based their information on secondary sources as against direct communication.
According to OMOR, the drop was consequent of agreement by ten OPEC MCs to adjust down their production from May 2020. Crude oil output in May decreased almost in all MCs mainly in Saudi Arabia, the UAE and Kuwait.
The report shows that Nigeria crude oil production stood at 1.59 mbd in the month of May, a decline by 185 tbd from the 1.77 mbd produced in April
On the supply side, the report stated that preliminary data indicates that global liquids production in May decreased by 10.04 mb/d to average 89.89 mb/d, compared with the previous month. Global crude supply fell considerably in May under the agreement signed by countries participating in the DoC, as well as the announced shut-ins by other countries, mainly in North America.
Non-OPEC liquids production in May, including OPEC NGLs and non-conventional liquids, is estimated to have fallen by 3.74 mb/d m-o-m to average 65.69 mb/d, lower by 3.99 mb/d y-o-y.
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Preliminary declines in production during May 2020 were mainly driven by Russia, US, Kazakhstan, Oman, Canada, Azerbaijan, Norway and Mexico.
The share of OPEC crude oil in total global production decreased by 3.6 pp to 26.9% in May compared with the previous month. Estimates are based on preliminary data from direct communication for non-OPEC supply, OPEC NGLs and non-conventional oil, while estimates for OPEC crude production are based on secondary sources.
Meanwhile, Non-OPEC liquids production growth in 2020 (including processing gains) has been revised up by 0.3 mb/d from the previous assessment and is now forecast to decline by 3.2 mb/d y-o-y, to average 61.80 mb/d in 2020.
The revision was mainly due to new data estimating oil production for April and May for the non-OPEC countries participating in the Declaration of Cooperation (DoC).
Increasing global crude oil prices in futures markets since the beginning of May reflect the perception of an earlier-than-expected recovery in oil demand amid a reduction in supply due to global production shut-ins.
Nevertheless, it remains to be seen whether US upstream investment can recover in the short term from the current deep cuts due to the COVID-19 pandemic and subsequent drop in oil prices.
Upstream investment in non-OPEC countries in 2020 is expected to decline by 30% y-o-y to $321 billion. Strong conformity with the voluntary production adjustments by the 10 non-OPEC participating countries in the DoC led to a drop in output of more than 2.95 mb/d in May (preliminary), while OPEC-10 cut 6.25 mb/d m-o-m.
At the same time, preliminary oil production outside of the DoC declined by 2.0 mb/d in April and0.8 mb/d in May, mainly in the US and Canada. Oil production of these two countries is likely to decline by a total of 1.8 mb/d in 2020, y-o-y.
Oil supply in 2020 is now forecast to grow only in Norway, Brazil, Guyana and Australia. The absolute level of production of OPEC NGLs was revised up. OPEC NGLs and non-conventional liquids are estimated to have declined by 0.08 mb/d y-o-y in 2019 to average 5.26 mb/d, following growth of 0.16 mb/d in 2018. The 2020 forecast indicates a decline of 0.03 mb/d to average 5.23 mb/d.