Oil output cut to dominate OPEC, non-OPEC meeting

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Oil output cut will dominate discussions at the forthcoming meeting of the Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC producers meeting holding in Abu Dhabi next week, following increased violation of compliance with production quota by members.

The meeting, which will hold between August 7 and 8,will involve experts to discuss ways to firm up member commitments to uphold their quotas.The OPEC, non-OPEC coalition monitoring committeewill give report on level of compliance with production cuts pledged by members.

The meeting, according to Platts, is expected to demand better compliance from defaulting members and to hand down warning to such violators and intending violators that the organisation would not tolerate any country that embarks on production overshoot.

Platts said: “Although conformity with the production agreement remains strong at the aggregate level, some countries continue to lag, which is a concern we must address head on,” Saudi Energy Minister Khalid al-Falih said at a meeting of the monitoring committee in St Petersburg last week.

Iraq, for example, averaged 69,000 barrels per day (bpd)above its quota from January through June, according to data from the S&P Global Platts OPEC survey, one of six secondary sources used by the coalition to monitor OPEC production. That is the largest amount by which any member of the bloc is exceeding its target.

Iraqi minister Jabbar al-Luaibi will be meeting with Falih in the coming days, as well as with Iran oil minister Bijan Zanganeh, according to the Iraqi oil ministry.

“Our friends had some viewpoints and gave some explanations,” Zanganeh was quoted by Iran’s Shana news service as saying.

“They had justifications for their actions. We will continue talks with them.”

Luaibi has insisted for months that the deal concerns exports, not production, contrary to the text of the agreement on OPEC’s website, and as the deal was being negotiated last fall, he complained that OPEC’s secondary sources were not accurately reflecting Iraq’s production levels.

Other countries have likewise complained about secondary sources, but in almost every case, secondary source production estimates have been lower than what OPEC members have directly reported to the secretariat.

For example, of the nine OPEC members that submitted June production figures to OPEC, six were estimated by secondary sources to have equal or lower production.Of the remaining three, the secondary source estimates for Qatar and Angola were only 10,000 bpd above their directly submitted figures, while Nigeria’s was 70,000 bpd above, though Nigeria is exempt from the deal.

Overall, the monitoring committee pegged June compliance among the OPEC/non-OPEC producer coalition at 98 per cent.

The International Energy Agency (IEA), an OPEC secondary source, had compliance among the 12 OPEC members with quotas under the deal at 78 per cent in June and 92 per cent for all of the year.

Platts reports that it sees compliance much higher, with June coming in at 103 per cent and overall 2017 at 116 per cent.

No matter the secondary source, however, Saudi Arabia’s over-compliance is what enables the entire coalition to achieve high compliance levels. The kingdom has cut 107,000 bpd more than its required level, according to Platts data, and Falih in St Petersburg said Saudi crude exports would be held to a six-year low in August.

According to OPEC, the monitoring committee said the meeting will be co-chaired by technical representatives from Kuwait and Russia and also attended by officials from Saudi Arabia. Venezuela, Algeria and Oman, the other members of the OPEC/non-OPEC monitoring committee will not be attending.

“This is a technical meeting being held to better understand the difficulties and obstacles faced by some OPEC and non-OPEC participating countries and to assess how conformity levels can be improved with the goal of achieving a faster rebalanced global oil market, for the benefit of producers and consumers alike,” the committee said.

The production cut deal, which went into force January 1, calls on OPEC and 10 major non-OPEC producers to cut a combined 1.8 million bpd.The coalition on May 25 agreed to extend the deal past its June expiry through March, next year.

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