OPEC Meeting Fails To Impress Market With Reaffirmation

Iraq, Kazakhstan, and the United Arab Emirates—three of OPEC’s most disobedient members when it comes to adhering to the production cut deal agreed to in November last year—reaffirmed their commitment to the deal at OPEC’s most recent meeting in Abu Dhabi. Malaysia also reaffirmed its support.

While the industry was largely hoping that the meeting would bear more fruit than mere affirmations, this latest round of meetings, held Monday and Tuesday, was always touted by OPEC to be nothing more than talks on compliance—or, rather, the lack of compliance.

The meeting “proved fruitful” according to an OPEC statement posted on its website, and “will help facilitate full conformity with the Declaration of Cooperation, which participating countries remain steadfast in their commitment to fulfil.”

Shortly after being called on the carpet after OPEC’s last meeting in late July, the UAE pledged to cut crude oil exports starting in September. Japan is the UAE’s largest customer of crude oil, taking 62% of all UAE crude oil, according to the UAE Embassy website. The UAE had agreed to cut 139,000 bpd off its production to stay under 2.874 million bpd, but has exceeded its production quota every month since the deal was signed.

Iraq has been the most egregious noncomplier of the bunch, despite repeated pledges that it would fully comply, and has been producing 69,000 bpd over its quota from January and June, according to S&P Platts.

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Of particularly noteworthiness is Kazakhstan’s affirmation to stick to the deal, after stating last month it would increase—not decrease—its crude oil production. Kazakhstan had originally agreed to cut 20,000 bpd from its crude oil production, but Kazakhstan’s Minister of Energy, Kanat Bozumbayev, said last month, “…we agreed that when Kashagan grows, we will amend our obligations, and [OPEC] agreed to that.”

The conclusions of this meeting will be discussed at the 7^th JTC Meeting on August 21, 2017, in Vienna, Austria.

By Julianne Geiger for Oilprice.com

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