Page 4 - MEOG Week 49

MEOG COMMENTARY MEOG

Despite friction, OPEC+

reaches output compromise

The group managed to reach a compromise, though the historically compliant
Emirates’ have become a thorn in OPEC’s side with major ambitions of their own.

OPEC OPEC and its partners agreed a deal last week summer to increase output above permitted lev-
that will see members of the broader OPEC+ els, were swiftly chastised by Saudi and quickly
group increase total production by a combined improved their compliance. The latest deal pro-
WHAT: 500,000 barrels per day (bpd) from January 1 vides for the UAE to increase production in Jan-
OPEC+ has agreed to with further rises to be discussed on a monthly uary by 38,000 bpd.
ease production cuts basis. Meanwhile, Iraq, which promised to make
by 500,000 bpd from Current cuts stand at 7.7mn bpd and were compensatory cuts of nearly 700,000 barrels for
January 1. due to drop to 5.7mn bpd next month. The new the final four months of the year, increased pro-
agreement, though, will see monthly hikes of a duction in October and to that point had failed
WHY: maximum of 500,000 bpd, effectively pushing to improve compliance despite a commitment
Members had been back the total increase by three months, accord- from the country’s Ministry of Oil (MoO).
pushing to reduce the ing to Russian Deputy Prime Minister Alexander Prince Abdulaziz said that the compensatory
cuts, while kingpin Saudi Novak. Meanwhile, Iranian Oil Minister Bijan scheme had not been as successful as the group
Arabia had proposed an Zanganeh said that the group would stick to the had hoped, but added that members had given
extension of the 7.7mn new deal until the total production increase had “many assurances” about their commitment
bpd reductions for three reached 2mn bpd. and said that the cartel would make a “relent-
further months. Speaking to reporters on the sidelines of the less quest” to ensure compliance. Meanwhile, he
Vienna summit, Saudi Energy Minister Prince asked for media to stop seeing OPEC+ as Star
WHAT NEXT: Abdulaziz bin Salman Al-Saud said: “The mar- Wars of Game of Thrones, underlining that over-
The group will meet ket should take comfort [from] the idea that we all compliance with historic production cuts is
monthly to assess moves have all of the tools in our kit and will release 99.5%.
to further ease the output them drip by drip as we see how the market Quota exemptions will continue for Iran,
restrictions. behaves. It’s a sensible way of being very careful Venezuela and Libya, with Prince Abdulaziz say-
and diligent.” ing that despite the latter’s rampant production
increase following a ceasefire, it would remain
Rift exempt until political stability had returned.
The announcement followed well-publicised
friction between OPEC’s two key allies, Saudi Compliance in the crosshairs
Arabia and the UAE, with the latter keen to Iraqi export data was published shortly after the
push for higher output as it seeks greater deci- announcement and should provide encourage-
sion-making powers on its own upstream ment for OPEC, with November sales having
strategy. fallen by around 134,000 bpd during the month
The UAE refused to give its support for Saudi – a start, though far short of the compensatory
proposals to extend the 7.7mn bpd cuts for a fur- cuts promised.
ther three months unless quota-busting mem- Data from the MoO showed that southern
bers, including Iraq, Nigeria and Russia, be held (federal) exports averaged 2.709mn bpd in
to account and forced to make the promised, but November, down from 2.876mn bpd in Octo-
as yet largely undelivered, compensatory cuts. ber, while sales by the Kurdistan Regional Gov-
In October, OPEC members Angola, Congo ernment (KRG) rose to 435,000 bpd, up from
(Brazzaville), Equatorial Guinea, Gabon, Iraq, 401,000 bpd the previous month.
Nigeria and the UAE committed to a combined However, the drop in exports is expected to
1.054mn bpd in compensatory cuts for Septem- be short-lived, with Oil Minister Ihsan Abdul
ber-December, with a further 586,000 bpd com- Jabbar saying over the weekend that federal sales
pensation required but unaccounted for in their would amount to 2.8mn bpd in December, but
plans. Meanwhile, OPEC+ partners committed noted that the country would abide by the terms
to a further 168,000 bpd in cuts for the same of the latest OPEC+ agreement. Perhaps opti-
period, with another 566,000 bpd in over-pro- mistically with regard to total Iraqi compliance
duction unaccounted for. with the deal, Jabbar said that Kurdish exports
The Emirates, which broke formation in the would average 250,000 bpd, which would

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