Member countries of the Organisation of Petroleum Exporting Countries (OPEC) and its non-OPEC allies led by the Russian Federation in a crude oil production freeze agreement to rebalance oil prices were failing in their commitments to the pact, the International Energy Agency (IEA) has disclosed.
Together, the IEA, which just released its latest Oil Market Report (OMR), said the 14 OPEC member countries, and their eight non-OPEC members, were producing 470,000 barrels of oil per day in excess of the commitment they reached in December 2016, and renewed in July 2017, to take out up to 1.8mbd of oil from the market to rebalance it.
IEA, however, noted in the OMR that OPEC’s commitment rate to the output cut fell in July to a new low of 75 per cent from 77 per cent that was recorded in June, 2017, while that of non-OPEC countries acting in support of the output freeze was 67 per cent.
In a somewhat agreement with IEA, OPEC, however reported in the August 2017 edition of its Monthly OMR that its crude oil production increased to a daily rate of 32.869 million barrels, up by 172,600bpd.
It explained that Nigeria; Libya; and Saudi Arabia were the main drivers behind its July production increase, adding that Libya raised its output by 154,300bpd; Nigerian by 34,300bpd to 1.748mbd; and Saudi Arabia up by 31,800bpd to 10.067mbd.
“According to five secondary sources, total OPEC-14 crude oil production averaged 32.87mbd in July, an increase of 173,000bd over the previous month. Crude oil output increased mostly in Libya, Nigeria, and Saudi Arabia, while production showed declines in Iraq, Angola and Venezuela,” said the OPEC MOMR.
The IEA, in its separate report, said: “The compliance rate with OPEC’s output cut fell again in July to a new low of 75 per cent from June’s revised figure of 77 per cent. For those non-OPEC countries acting in support, their compliance rate in July was 67 per cent.”
“Together, the twenty-two countries are producing about 470kb/d in excess of their commitment. Some of them are clearly determined that the output agreements will succeed: Saudi Arabia has indicated that export levels in August will fall to 6.6mb/d, and, according to recent reports, it will cut customer allocations in September.
“Other countries currently have very low compliance rates, although this can change. In passing, we must note that the current situation in Venezuela is being monitored closely with respect to any market impact should oil production and exports fall significantly,” it added.
In its further assessment of the oil market vis-à-vis efforts by OPEC and its allies, the IEA’s OMR stated: “The re-balancing of the oil market desired by the leading producers has been a stubborn process and it takes time for the numbers to confirm what many observers instinctively feel has already happened.
“Sure enough, new data suggests that in 2Q17 global stocks fell by 0.5mb/d and preliminary data for July, particularly in the United States where stocks fell by 790kb/d, is supportive. Even so, we must not forget that they are falling from a very great height in volume terms.”
“There would be more confidence that re-balancing is here to stay if some producers party to the output agreements were not, just as they are gaining the upper hand, showing signs of weakening their resolve. Producers should find encouragement from demand, which is growing year-on-year more strongly than first thought,” it added.