As OPEC, the group of oil producing countries from the Middle East, implements production cuts aimed at erasing a global surplus, oil supplies from OPEC are plunging this month, as mentioned by tanker-tracker Petro-Logistics SA.
The Geneva-based consultant said that in January, the first month of the accord’s implementation, the Organization of Petroleum Exporting Countries will reduce supply by 900,000 barrels a day. And that drop in production and shipment is equivalent to almost about 75 percent of the total crude supply cut that the producer group had agreed upon late last year. Curbing their output in support of the OPEC cut are eleven non-members led by Russia.
Daniel Gerber, chief executive officer of Petro-Logistics, which has monitored tanker movements for more than three decades said that the data suggest “a high level of compliance thus far into the production curtailment agreement.” Apart from the assessments made and expressed by OPEC, those estimates are one of the first outside of OPEC’s.
When countries met to discuss monitoring implementation, Saudi Arabia Energy Minister Khalid Al-Falih said on Jan. 22 that adherence to the accord is “great.”
As Iraq presses on with the rehabilitation of its oil industry after years of war and sanctions, there have been rising doubts among a section of analysts, such as London-based consultants Energy Aspects Ltd., about whether the war ravaged country will ultimately deliver its share of the cuts and the promises that it has made to the oil cartel and the global oil industry.
The crude market gains have been subsequently stalled amid uncertainty over how much of the cutbacks would be delivered even though oil prices initially rallied in the two weeks after OPEC announced the supply curbs on Nov. 30. On Friday, Brent crude futures traded at about $55 a barrel in London.
The organization took additional steps to prove it will honor its commitments recognizing the skepticism among oil traders.
While Russia said it’s trimming production faster than was originally agreed, OPEC nations Saudi Arabia, Kuwait, Algeria have said they’ve cut output this month by even more than was required. In order to make it possible that OPEC probably won’t need to extend the accord when it expires at the middle of the year, producers have fulfilled their obligations so faithfully, said Saudi Arabia’s Al-Falih on Jan. 22.
A five-nation committee tasked with overseeing compliance has been set up by producers. For a review of production data and to witness whether the ciuts are being followed, that committee would next meet in late March.
Higher than the level OPEC typically achieved in the past would be an implementation rate of 75 percent. According to Hasan Qabazard, OPEC’s former head of research, during the financial crisis of 2008, the best rate attained during its previous agreement, and it was 70 percent.
(Adapted from Bloomberg)