Opec-Plus: Walking the High Wire
The Opec-plus alliance’s decision in April to cut production by a record 9.7 million barrels per day in the face of massive demand destruction has proved a relative success.
Oil prices topped $40 per barrel this week, for the first time since they collapsed in March, as the group’s compliance came in at an impressive 86% last month (EC May22’20).
This is not the time to rock the boat — something the group’s leaders Russia and Saudi Arabia both appeared to recognize when they provisionally agreed to extend the current cuts by up to two months, from July.
But pressure on laggards, Iraq among them, to better their performance — including to overcomply to cuts in coming months to make up for compliance shortfalls in May — highlights tensions within the alliance.
The back-and-forth this week over the date of the next Opec-plus ministerial meeting was certainly more than just an administrative matter.
Virtual meetings are easier than ever to rearrange, even for an unwieldy 23-member alliance of countries such as this. Instead, when plans to move the meeting forward to Jun. 4 fell apart this week, the group’s hard-fought message of coordinated crisis management was left somewhat undermined.
The push to change the original date from Jun. 9-10 was thought to be partly an attempt to pre-empt negative news on May compliance, although the reason given was to facilitate July cargo nominations for the producers’ term customers.
But the date of the next meeting is now up in the air, with the Saudis and Russians pushing for “fresh assurances” that members who failed to comply in May will do so in future — and indeed overcomply in the coming months to bridge the difference.
Gulf states will not continue with the additional voluntary cuts of nearly 1.2 million b/d for June, sources familiar with the matter say.
| Opec-Plus Cuts, May 2020 | |||
| (‘000 b/d) | Base | Target | May |
| Opec | 26,683 | 20,599 | 21,493 |
| Saudi Arabia | 11,000 | 8,492 | 8,490 |
| Iraq | 4,653 | 3,592 | 4,128 |
| UAE | 3,168 | 2,446 | 2,443 |
| Kuwait | 2,809 | 2,168 | 2,177 |
| Nigeria | 1,829 | 1,412 | 1,482 |
| Angola | 1,528 | 1,180 | 1,340 |
| Algeria | 1,057 | 816 | 812 |
| Congo (Br.) | 325 | 251 | 310 |
| Gabon | 187 | 144 | 226 |
| Eq. Guinea | 127 | 98 | 85 |
| Non-Opec 10 | 17,170 | 13,554 | 14,051 |
| Russia | 11,000 | 8,492 | 8,590 |
| Mexico | 1,753 | 1,653 | 1,660 |
| Kazakhstan | 1,709 | 1,319 | 1,527 |
| Oman | 883 | 682 | 680 |
| Azerbaijan | 718 | 554 | 624 |
| Malaysia | 595 | 459 | 488 |
| Bahrain | 205 | 158 | 175 |
| South Sudan | 130 | 100 | 126 |
| Brunei | 102 | 79 | 97 |
| Sudan | 75 | 58 | 84 |
| Total | 43,853 | 34,153 | 35,544 |
| Base is October 2018 output, but was set at 11 million b/d for Russia and Saudi Arabia. Opec members Venezuela, Libya and Iran are exempt from cuts. Mexico allowed to cut proportionally less. Source: Opec, Energy Intelligence |
SOURCE: energyintel.com
