Page 6 - LatAmOil Week 49

LatAmOil COMMENTARY LatAmOil

OPEC+ reaches output compromise

OPEC and its partners agreed a deal last week and said that the cartel would make a “relentless
that will see members of the broader OPEC+ quest” to ensure compliance.
WHAT: group lift total output by a combined 500,000 Meanwhile, he also asked media agencies to
OPEC+ has agreed to barrels per day (bpd) from January 1 with fur- stop treating OPEC+ like Star Wars or Game of
ease production cuts ther rises to be discussed on a monthly basis. Thrones, underlining that overall compliance
by 500,000 bpd from Current cuts stand at 7.7mn bpd and were with historic production cuts is 99.5%.
January 1. due to drop to 5.7mn bpd next month. The new Quota exemptions will continue for Iran,
agreement, though, will see monthly hikes of a Venezuela and Libya, with Prince Abdulaziz say-
WHY: maximum of 500,000 bpd, effectively pushing ing that despite the latter’s rampant production
Members had been back the total increase by three months, accord- increase following a ceasefire, it would remain
pushing to reduce the ing to Russian Deputy Prime Minister Alexan- exempt until political stability had returned.
cuts, while kingpin Saudi der Novak. Meanwhile, Iranian Oil Minister
Arabia had proposed an
extension of the 7.7mn Bijan Namdar Zanganeh said that the group Compliance in the crosshairs
bpd reductions for three would stick to the new deal until the total pro- Iraqi export data was published shortly after the
further months. duction increase had reached 2mn bpd. announcement and should provide encourage-
Speaking to reporters on the sidelines of the ment for OPEC, with November sales having
WHAT NEXT: Vienna summit, Saudi Energy Minister Prince fallen by around 134,000 bpd during the month
The group will meet Abdulaziz bin Salman Al-Saud said: “The mar- – a start, though far short of the compensatory
monthly to assess moves ket should take comfort [from] the idea that we cuts promised.
to further ease the output have all of the tools in our kit and will release Data from the MoO showed that southern
restrictions. them drip by drip as we see how the market (federal) exports averaged 2.709mn bpd in
behaves. It’s a sensible way of being very careful November, down from 2.876mn bpd in Octo-
and diligent.” ber, while sales by the Kurdistan Regional Gov-
ernment (KRG) rose to 435,000 bpd, up from
Saudi-UAE rift 401,000 bpd the previous month.
The announcement followed well-publicised However, the drop in exports is expected to
friction between OPEC’s two key allies, Saudi be short-lived, with Oil Minister Ihsan Abdul
Arabia and the UAE, with the latter keen to Jabbar saying over the weekend that federal
increase output as it seeks greater decision-mak- sales would amount to 2.8mn bpd in December,
ing powers on its own upstream strategy. but noted that the country would abide by the
The UAE refused to give its support for Saudi terms of the latest OPEC+ agreement. Perhaps
proposals to extend the 7.7mn bpd cuts for a fur- optimistically with regard to total Iraqi com-
ther three months unless quota-busting mem- pliance with the deal, Jabbar said that Kurdish
bers, including Iraq, Nigeria and Russia, be held exports would average 250,000 bpd, which
to account and forced to make the promised, but would assume a more than 40% reduction on
as yet largely undelivered, compensatory cuts. current levels. Venezuela will
In October, OPEC members Angola, Congo According to an internal OPEC document remain exempt
(Brazzaville), Equatorial Guinea, Gabon, Iraq, seen by S&P Global Platts, Iraq’s January target
Nigeria and the UAE committed to a combined will be 3.857mn bpd, up 53,000 bpd from the from OPEC+
1.054mn bpd in compensatory cuts for Septem- country’s quota between August and December.
ber-December, with a further 586,000 bpd com- While Jabbar noted that Iraq’s intention is production
pensation required but unaccounted for in their to raise prices rather than sales volumes, the
plans. Meanwhile, OPEC+ partners committed country’s Finance Minister and Deputy Prime quotas
to a further 168,000 bpd in cuts for the same Minister Ali Allawi has publicly questioned the
period, with another 566,000 bpd in over-pro- long-term feasibility of restraining oil produc-
duction unaccounted for. tion while the government operates at a monthly
The UAE, which broke formation in the sum- deficit of around $3bn. (Jabbar has repeatedly
mer to increase output above permitted levels, reiterated Iraq’s commitment to the cuts, though
were swiftly chastised by Saudi Arabia and compliance has continued to be poor.)
quickly improved compliance. Meanwhile, Iraq, Meanwhile, with Iraq set to launch its new
which promised to make compensatory cuts of Basrah Medium crude grade in January and
nearly 700,000 barrels for the final four months the UAE having already embarked on an initi-
of the year, increased production in October and ative to make its Murban crude a benchmark to
to that point had failed to improve compliance strengthen the Emirates’ position as the region’s
despite a commitment from the country’s Min- financial hub, it is perhaps unsurprising that
istry of Oil (MoO). these countries will remain the primary areas of
Prince Abdulaziz said that the compensatory concern for OPEC over the coming months. In
scheme had not been as successful as the group any case, the cartel and its allies will be hoping
had hoped, but added that members had given that the roll-out of a coronavirus (COVID-19)
“many assurances” about their commitment vaccine will stimulate oil demand in 2021. ™

P6 www. NEWSBASE .com Week 49 10•December•2020