Organisation of Petroleum Exporting Countries (OPEC) members are having trouble keeping their promises, according to reports by Ivana Kottasova of the CNN.
Only a handful of OPEC countries are in full compliance with the cartel’s agreement to limit crude production, according to the International Energy Agency (IEA).
Overall compliance with the deal slumped to 78 per cent in June, from 95 per cent in May. It’s the lowest level since the agreement came into force in January.
“While the top producer, Saudi Arabia, continues to deliver on its promise to cut output, several other producers have not so far fulfilled their commitments,” the IEA said in a new report.
In addition to Saudi Arabia, Equatorial Guinea and Angola were the only other members in full compliance.
OPEC and other key producers including Russia agreed to slash output in November, part of an attempt to eliminate a global oil glut and boost prices. In May, the group extended the deal to the end of March 2018.
The IEA, which monitors energy trends for the world’s richest nations, said OPEC crude production rose by 340,000 barrels per day in June to 32.6 million, the highest level in 2017.
Saudi Arabia produced 10.05 million barrels a day in June, the first time this year that its production has surpassed 10 million barrels a day. However, it stayed within its allocated limit.
Libya and Nigeria, which were spared from supply cuts because they are recovering from conflict, also opened the taps.
The IEA said the non-OPEC producers who volunteered to cut production were actually better at sticking with the deal in June. Their compliance improved to 82 per cent.
Crude prices pushed above $54 in the months following the November deal, but the boost was short-lived. Oil dipped into a bear market last month, but prices have since recovered some of the lost ground.
Rising U.S. shale production is also putting pressure on the OPEC agreement. Goldman Sachs warned on Tuesday that crude oil could plunge below $40 a barrel “soon” if OPEC fails to take further action.
U.S. crude production has been growing steadily, topping more than 9 million barrels a day in February, according to the U.S. Energy Information Administration.
The number of rigs in operation has more than doubled from May 2016. The IEA expects U.S. crude production to grow by 780,000 barrels per day next year.
Meanwhile, Reuters Paul Carsten quoted Nigeria’s Oil Minister, Ibe Kachukwu as saying that Nigeria will put off deciding whether to join OPEC cuts.
Nigeria supports OPEC’s efforts to stabilize oil prices, but it wants to wait before deciding whether to join the cartel’s cuts in oil production, its oil minister said on Wednesday, July 12.
“Hopefully, in the next two to three months we can see how predictable the production return has been and then can say we feel stabilized and need to make the corresponding cuts,” Kachikwu told reporters.
Nigeria and Libya, whose output has been hit by political turmoil and attacks, are exempt from an the Organization of Petroleum Exporting Countries agreement, which is an effort to reduce a glut of crude oil on world markets.
Nigeria’s benchmark level to join the OPEC cuts is production of 1.8 million barrels of crude a day. Its current output is around 1.7 million barrels a day, excluding condensates, Kachikwu said.
Nigeria’s output had improved in recent months, after the government managed to end militant attacks on oil pipelines in the Niger Delta by opening peace talks with leaders in the restive oil hub.
Kachikwu also said he would not attend a meeting between OPEC and non-OPEC nations on July 24 in Russia, because he would be hosting a meeting of African oil producers in Abuja on the same day.
“We (OPEC) are fairly in consensus on our position on cuts,” he said, adding that OPEC hoped oil prices would stabilize later this month.
Under the supply deal, OPEC is curbing output by about 1.2 million barrels a day. Russia and other non-OPEC producers are cutting half as much, until March 2018.
OPEC said on Wednesday its oil production jumped in June and forecast world demand for its crude would decline next year as rivals pump more, pointing to a market surplus in 2018 despite the OPEC-led output cut.
Giving its first forecasts for 2018 in a monthly report, OPEC said the world will need 32.20 million barrels per day of crude from its members next year, a fall of 60,000 barrels a day from this year.
.CNN &Reuters