OPEC members seem to be adhering to agreed production cuts, meanwhile Saudi Arabia is overcompensating for some of its fellow oil producers.
The deal was made late last year and it requires that 10 member sates reduce their collective output by 1.2 million barrels per day (bpd) as of January 1st.
S&P Global Platts, a company that monitors monthly OPEC production, released its survey earlier this week and discovered members reached 91 percent of their required cuts for the month of January, 11.4 million bpd.
“OPEC spent much of the last half of last year talking up this deal. We wanted to see whether they were actually going to walk the walk and not just talk the talk,” Herman Wang, OPEC specialist at S&P Global Platts, told CNBC.
“The 10 members that were required to cut production under this deal have achieved 91 percent, 1.14 million bpd, of cutting from October levels, which was where this deal was benchmarked from.”
But, the compliance rate has not been spread evenly. Countries like Saudi Arabia, Kuwait, and Angola have been over complying which in return is compensating for OPEC members who are under complying.
For example, Saudi Arabia produced 9.98 million bpd in January, well below its allocation of 10.06 million bpd.
Meanwhile countries like Algeria, Venezuela, and Iraq are producing more oil than their quota. To be more specific, Iraq was singled out by the S&P Global Platts report, due to its January output of 4.48 million bpd being well over its quota of 4.35 million bpd (although the report noted Iraq’s output had declined 150,000 bpd from December).
“Saudi Arabia is bearing the brunt of these cuts,” said Wang.
“They are going above and beyond, compensating a little bit for some of their cohorts within OPEC that are not quite in full compliance. Now how long Saudi Arabia is willing to shoulder the burden of these cuts if it proves some of their cohorts are not fully complying with the deal remains to be seen.”
These days oil prices are trading much stronger, Brent crude is up 40 cents to $55.52 per barrel, and WTI crude 51 cents at $52.84 per barrel.
Article written by HEI contributor Lydia Ezeakor.
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