OPEC deal: How long can oil producers maintain reduced output?
* In December 2016, OPEC and 11 other producers agreed to cut combined output by 1.8m bpd
* Increased output from exempted countries and US shale producers has dampened enthusiasm
* Debate on whether to extend deal into second half of this year
Oil rallied early this year after crude oil producers – both OPEC members and non-members – pledged to cut their share of production in order to help the sinking market.
But the increased output from countries that were exempted from the deal, such as Iran, Libya and Indonesia, combined with US shale producers boosting their production, have dampened enthusiasm in the market since then.
So how long can the oil producers maintain the reduced output?
Say no to cheating!
The Organization of the Petroleum Exporting Countries and 11 other leading oil producers, including Russia, agreed in December to cut their combined oil output by almost 1.8 million barrels per day (bpd) in the first half of the year.
The accord was aimed at reducing bloated global inventories and propping up weak oil prices.
As we go by figures provided by the producers themselves and six secondary sources, the deal has made history. As no evidence of cheating has been found, the rate of compliance has gone up to 94 per cent.
The agreement has elevated the price of crude to more than $50 a barrel, but it has also helped US shale oil producers boost their output, hampering efforts to reduce global stockpiles.
Russia waiting for April-May
Russia said it would reduce production by 200,000 bpd in the first quarter, with cuts reaching 300,000 bpd thereafter.
Russian Energy Minister Alexander Novak recently said that the country so far had reduced output by 185,000 bpd.
He has said it is too early to decide whether prolonging the deal is warranted and that the situation would be clearer in April-May.
Market to decide
Iraqi Oil Minister Jabar Ali al-Luaibi said on Saturday the market is a decisive factor in deciding whether a global agreement on reducing oil output to extend into the second half of this year.
“The market will decide. The market is a decisive factor,” Luaibi told reporters in Kuwait, where a committee set up to monitor the production cuts is convening on Sunday.
He said Iraq was in full compliance with the output-cut agreement.
“Extension is good”
Algerian Energy Minister Nouredine Bouterfa has said that an extension could benefit the market.
“Perhaps an extension is good… Algeria supports extending the deal,” he commented.
Kuwait heads the monitoring committee, whose members also include Algeria, Venezuela, Russia and Oman.
(With inputs from Reuters)