OPEC’s compliance to the crude oil production cuts is expected to increase in March, from an already impressive 94 percent compliance rate reached in February. As UAE ratchets up its efforts to curb production and get behind the production cut agreement, compliance is expected to reach 95 percent in March—what Reuters is calling a record high.
According to a Reuters survey, despite Saudi Arabia’s slight increase to its March output, the heavyweight producer will still have cut well beyond its fair share since the cuts were implemented in January. Add to that a much-anticipated increase in UAE’s March compliance—as well as Libya’s faltering with a force majeure that took 252,000 barrels per day out of the mix and lowered crude production in Nigeria, both of which were exempt from the cut—and you have exactly what no one expected OPEC to achieve: darn good compliance.
Even previously non-compliant Iraq is expected to improve its compliance in March, although they are, by a long shot, responsible for the most overproduction since the cuts began.
OPEC is likely rejoicing what with the UAE, who has historically been compliant with other cuts, now getting behind Saudi Arabia and Kuwait in terms of compliance. With prices unable to go much higher than the low 50s per barrel, OPEC would love to surprise the markets again with perfect compliance, but there are still expected to be a few non-compliers in March that will keep OPEC from reaching 100%. Related: Shell’s New Permian Play Profitable At $20 A Barrel
As of February, the most noncompliant, according to OPEC’s secondary sources, were Algeria (1.053 mpbd vs. 1.039 mpbd), Iran (3.814 vs. 3.797), Iraq (4.414 mpbd vs. 4.351 mpbd), and Venezuela (1.987 mpbd vs. 1.972 mpbd). Collectively, these countries overproduced 109,000 barrels per day in February, and while March is expected to see stronger compliance from Iraq—OPEC’s second largest producer—compliance is expected to climb a single percent to 95%.
Even with OPEC’s improved showing in March, lingering heavy supplies may force OPEC to extend the cuts into the second half of 2017.
By Julianne Geiger for Oilprice.com
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