OPEC agrees to curb production to comply with output cuts

production cuts

The Organization of Petroleum Exporting Countries agreed to curb production to meet the output cuts agreed by the members and allies.

The cartel asked members that produced over their quotas – Iraq and Nigeria – to adjust to the group’s target, as it strives to avoid a production glut while the United States continues to increase its output and the market faces the slowdown in the global economy.

Oil prices have dropped under $60 per barrel over the past weeks after hitting $75. Fears of a global recession overcome concerns over the fall of supply in sanction-stricken Iran and Venezuela.

In the meantime, the Joint Ministerial Monitoring Committee met on Thursday in Abu Dhabi. This meeting comes prior to its debate on policy in Vienna, Austria, scheduled for December.

In detail, the JMMC is in charge of monitoring the market formed by the OPEC+, a group of oil producers including OPEC members and allies like Russia.

Compliance with the agreement

The OPEC+ has complied with (and even exceeded) the deal to curb oil production by 1.2 million barrels per day, according to reports issued by the organization. This transpired as Iranian exports collapsed due to sanctions, as did Venezuelan production due to several factors – including lack of investment in the sector and poor operative management. However, some members, like Iraq and Nigeria, have been increasing their production.

Iraq has been ramping up production and exports in recent years. Over the past months, Last month, its production hit 4.8 million bpd, instead of the agreed 4.51 million limit.

Meanwhile, Nigeria pumped 1.85 million bpd in August, up from the pledged 1.69 million.

On the contrary, Iranian exports crumbled last year, due to sanctions imposed by the United States.

Iraq, the organization’s second-largest producer, promised to lower oil production by 175,000 bpd in October. For its part, Nigeria assured it will reduce supply by 57,000 bpd.

OPEC’s de facto leader Saudi Arabia will keep output under the pledged limit, according to Prince Abdulaziz bin Salman, who replaced former energy minister Khalid al-Falih on Sunday.

The kingdom will voluntarily overdeliver on its target and keep production under 10 million bpd, Abdulaziz said.

Market analysis

The official stated that Thursday’s meeting also served to discuss the rise of U.S. shale oil production and exports, global economic slowdown, and the possibility that the U.S. eases sanctions on Iran, an OPEC member.

Any formal decision on a deeper oil production cut could be made as soon as the next OPEC+ meeting in December, the prince added.

“I can tell you quite frankly that in all deliberations we have discussed all the potential uncertainties as any responsible organization and we are mindful of them,” Prince Abdulaziz said.

“There is clear readiness to continue to be responsible and responsive.”

Production cuts

The OPEC, Russia, and other non-member allies agreed in December to curb production by 1.2 million bpd, or 1.2% of the global supply, starting January 1st of this year.

The organization’s share of this cut – now extended until March 2020 – is 800,000 bpd, with participation of 11 members, except for Iran, Libya, and Venezuela.

Oil prices fell by more than two percent on Wednesday after a report that U.S. President Donald Trump could ease sanctions against Iran. This could boost global crude supply, at a time of persistent concerns over energy demand.

The search for stability

After its 16th meeting, the JMMC underlined “the critical need for continued commitment to the ‘Declaration of Cooperation’ (DoC) in support of oil market stability on a sustainable basis.”

According to a statement issued by the organization, “all participating countries present, particularly those who are yet to reach full conformity with their adjustments, were unequivocal in providing steadfast assurances of their determination to achieve at least 100% conformity for the remainder of the year.”

Moreover, the Committee analyzed the range of critical uncertainties facing the global economy in 2019 and 2020, including trade-related tensions, monetary policies, and other macroeconomic factors.

It also encouraged continued vigilance in monitoring the condition of the oil market.

The Committee’s upcoming meeting is scheduled for December 4, at the OPEC Secretariat in Vienna, Austria.

For more information, check Energía16

See also: Japan considers dumping radioactive water from Fukushima into the sea

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