Kuwait Oil Output Recovers to 2 Million Barrels a Day as More Tankers Transit Hormuz
Kuwait is producing about 2 million barrels of oil a day, Sheikh Nawaf Saud Al-Sabah, chief executive of Kuwait Petroleum Corporation, said in an interview with Bloomberg published on 5 October. Output had fallen below 1 million barrels a day in the opening months of the disruption that began at the end of February, Bloomberg reported. The corporation is meeting its crude oil obligations to customers, and a growing number of tankers are transiting the Strait of Hormuz, he said.
From the June target toward the pre-disruption level
The 2 million barrel level is the one the corporation set in June, when it said it would raise output to 2 million barrels a day within a week and lift all force majeure notices issued during the disruption, according to a statement carried by KUNA. It said then that pre-disruption production could be restored within weeks once regular international commercial shipping to Kuwaiti ports resumed. Before the disruption Kuwait pumped about 2.6 million barrels a day, the chief executive said on 5 October, which places current output at about three quarters of that level and 600,000 barrels a day short of it, on our calculation. Production capacity stands at 3 million barrels a day, he said, so current output uses about two thirds of it, on our calculation.
Kuwait’s 2 million barrels a day against its benchmarks
| Benchmark | Million b/d | Output as a share | Gap, million b/d |
|---|---|---|---|
| Production capacity | 3.0 | 67% | 1.0 |
| OPEC+ required production, November | 2.676 | 75% | 0.676 |
| Output before the disruption | 2.6 | 77% | 0.6 |
b/d is barrels a day. Current output, pre-disruption output and capacity are the round figures the chief executive gave in the 5 October interview; required production is from OPEC’s statement of 4 October. Shares and gaps are our calculation, rounded; the gaps are arithmetic differences, not capacity ready for immediate use.
Kuwait’s required production under the OPEC+ arrangement is 2.676 million barrels a day for November, unchanged from September and October, which puts current output at about 75 percent of the required level and 676,000 barrels a day under it, on our calculation.
What the barrels represent at the Kuwait Export Crude price
Kuwait Export Crude was priced at 105.91 dollars a barrel on 2 October, according to Kuwait Petroleum Corporation. At that price, 2 million barrels a day carries a notional value of 211.8 million dollars a day, each additional 100,000 barrels a day would add 10.6 million dollars a day, and restoring the 600,000 barrels a day to the pre-disruption level would add 63.5 million dollars a day, all on our calculation. These are values at the benchmark price, not export revenue.
Refineries working and expansion plans on schedule
Kuwait’s refineries that produce diesel and jet fuel are all working, the chief executive said, and the constraint is the lack of freedom of navigation through the strait. Before the disruption the country was a big supplier of these fuels to the region, and he said Europe’s emergency release of diesel and jet fuel was “because of Kuwait”. Over the past month more of Kuwait’s customers have said they are willing to bring in ships to collect cargoes, he said, and the corporation is working to expand its own fleet of 29 tankers. Its strategic projects are on schedule, he said, including the plan to raise production capacity to 4 million barrels a day by 2035 from 3 million, a third more on our calculation. Kuwait is also moving forward with plans for pipelines, with routes through Saudi Arabia and the UAE among the options, though he said no pipeline or storage facility can replace the Strait of Hormuz.
Why it matters: Kuwait has brought output back to about 2 million barrels a day, its refineries are working and the corporation is meeting its crude oil obligations to customers, the chief executive said. With capacity at 3 million barrels a day and expansion projects on schedule, the next gains turn on shipping rather than on the oil fields, on our reading, and each extra 100,000 barrels a day would carry 10.6 million dollars a day of value at the latest Kuwait Export Crude price, on our calculation.
Outlook: The seven OPEC+ countries, Kuwait among them, meet again on 1 November, and OPEC publishes its Monthly Oil Market Report on 13 October. On our reading, more tanker transits, customers’ willingness to bring in ships for cargoes and the expansion of the corporation’s own fleet are the channels through which output can move toward its pre-disruption 2.6 million barrels a day.
Sources: Kuwait Petroleum Corporation, OPEC, KUNA, Bloomberg, The Edge.
