In March 2023, OPEC's average production decreased by 86Mb/d compared to February, with a total production of 28.797MMb/d among members. Despite announcing a production cut of 1.27MMb/d for March, the actual reduction was 2.32MMb/d, representing a 182% decrease.
The drop in OPEC's production was driven by Angola and Iraq, while Saudi Arabia's production increased by 44Mb/d. Angola reported the largest decrease in production with a fall of 64Mb/d, followed by Iraq with a decrease of 18Mb/d.
Earlier in April 2023, OPEC, led by Saudi Arabia, announced a 500Mb/d cut in oil production for the rest of 2023. According to experts, OPEC’s latest move indicates that they project lower demand over the next months. Nonetheless, speculation alone might drive up prices and inflation.
Despite Russia's commitment to OPEC's production cut, its crude exports rebounded to over 3MMb/d during the week of April 14, after an eight-week low. Exports increased by 540Mb/d from the previous week. In March, Russia claimed to have cut production by 700Mb/d. Moreover, despite sanctions on Russian oil by the EU and G7 countries, Russia redirected its exports to Asia, resulting in the highest level of exports since April 2020 and an increase in revenue compared to February.
According to the International Energy Agency (IEA), the unwillingness or inability of non-OPEC members to make up for the cut could increase oil prices and push inflation. The IEA reported that it expected a deficit between oil supply and demand would arrive by 3Q23 but it moved the projection to 2Q23.
Furthermore, these developments could draw more attention to the Latin American oil market. In recent years, the US has developed oil supply chains in Latin American countries while OPEC countries have directed their exports to Asia. Mexico, Colombia, Brazil and Ecuador are the top Latin American crude oil suppliers to the US, with Mexico being the number one supplier.
AMLO Defends the National Oil Strategy
President López Obrador stated that his government had successfully reverted the downward trend in oil production.
López Obrador said this administration will increase oil production to 2MMb/d. Although oil production increased over the past couple of years, problems regarding PEMEX’s refining strategy and lack of a future roadmap to adapt to new energy trends were compounded by the NOC’s giant debt.
PEMEX reported losses from refining of MX$177.857 billion (US$6.56 billion) in 2022, an MX$5.137 billion (US$285.77 million) increase compared to 2021. Furthermore, Mexico’s energy trade deficit grew from US$21.4 billion in 2019 to US$24.6 billion in 2021. After the first eight months of 2022, the negative trade balance amounted to US$24.5 billion.