Non-Compliance From Various OPEC Members Is A Killer

Non-Compliance From Various OPEC Members Is A Killer

Non-Compliance From Various OPEC Members Is A Killer

 

Ahead of September’s monitoring meeting, OPEC remains between a rock and a hard place. Simon Watkins reports from London. Your Oil And Gas News

The key parties in December’s deal by OPEC and non-OPEC producers to cut production by 1.2 million bpd and 0.6 million bpd respectively face a no-win situation when they meet on September 22.

If they keep things as they are then the oil price will continue to gradually drift downwards. If they abandon the deal then the oil price would fall through the floor and inflict even more damage on their economies. While if they deepen production cuts then initial price increases would prompt even greater flows from the very people that they tried to destroy in 2014, the US shale drillers, Sam Barden, CEO of Middle Eastern energy trading firm and consultancy SBI Markets, told NewsBase Intelligence (NBI).

Factor into this the fact that the markets no longer believe a word any of them say, which means the days of trying to talk up prices are also long gone, and it’s a very bleak prospect indeed,” he added.

To begin with, before the deal was implemented many of the participants ramped up oil production so that the supposed cut in their output only took them back to their usual levels of output anyway, he said.

Most notable in this respect, both from the empirical perspective of absolute output produced and from the moral viewpoint of setting the tone for the other participants in the deal, was the boost in production witnessed by the de facto leader of OPEC, Saudi Arabia.

From June of 2016, when preliminary discussions over a production cut began, Saudi started to increase its output dramatically. In November, just before the production cut was finally agreed and publically announced, Saudi ramped up output to its highest level ever, 10.72 million bpd, compared with an average from 1973 to that point of 8.04 million bpd.

Indeed, having initially bewilderingly pretended that it misunderstood the deal, supposedly thinking it related to exports and not production, Iraq’s compliance slumped to just 29% in June, its lowest ever, according to the International Energy Agency (IEA).

Since then, Iraq has maintained that the baseline data that OPEC originally used in calculating the production limits underestimated actual production levels at the time and that it is consequently actually making the full reduction required.

In the meantime, non-OPEC Kazakhstan, rather than reducing its output as promised, has steadily increased it, with the relentless expansion of its Kashagan oilfield.

Exemptions and over-stocking

Another huge hole in the deal was that there were extremely significant exemptions made for some major oil producing nations, including Iran, Nigeria and Libya, Ruecker said. Regardless of the reasons why these countries were exempted, at the time the deal was announced, Iran was already producing nearly 4 million bpd, with plans on track to hit at least 6 million bpd as soon as possible, Nigeria was nearing production of 1.8 million bpd, and Libya was producing around 650,000 bpd even as it was suffering from technical problems at its fields.

Agbayi Paschal

Sales Executive

Epoxy Oilserv Limited

www.epoxyoil.com

Email:paschal.agbayi@epoxyoil.com

Mobile:+234-7065131380 or 07084158325

Download Our Product Brochure Here
Shell Lubricants: Lubrication and condition monitoring services, welding gases, welding materials, Metal fabrication,Industrial Chemicals etc.

Save

Save

Share Button

Leave a Reply

Your email address will not be published. Required fields are marked *