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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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OPEC Ready To Cut Deeper

OPEC is finding itself backed into a corner: the group, it appears, is prepared to extend the oil production cut agreement that is set to expire at the end of June and also increase the cuts, if inventories fail to drop to a specified level, sources from the group told Reuters.

The agreement, which also involves 11 non-OPEC producers, including Russia, Mexico, Kazakhstan, Azerbaijan, and several smaller producers, envisaged taking off around 1.8 million barrels from the global daily supply. This means, according to the sources, that global stockpiles should shrink with 300 million barrels in the six-month period, to reach the five-year average. This, however, requires a compliance rate of 100 percent from all participants.

Reliable inventory data from all the countries taking part in the agreement is not coming soon and will likely still not be available when OPEC meets in May to discuss progress. Non-OPEC producers may also attend the meeting.

Meanwhile, loading data from Angola, currently Africa’s largest oil exporter and a member of OPEC, has revealed that the country plans to export 1.691 million bpd in April, up from 1.54 million bps to be exported in March. Production increased to 1.651 million bpd in January, well above Nigeria’s 1.576-1.604 million bpd. Related: A Bloodbath Looms Over Oil Markets

Despite this stated readiness to cut as much as necessary for as long as necessary, the odds are against any noticeable pickup in prices, at least until conclusive supply data becomes available.

It’s true that OPEC is doing a surprisingly good job—at least initially—in complying with its promised output cuts, but pressured by budget deficits caused by the oil price crash, producers will be tempted to pump and export more at those higher prices. For many observers, there is only one question: when OPEC members – or non-OPEC producers for that matter – will start cheating and who will start first.

By Irina Slav for Oilprice.com

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Leave a comment
  • petergrt on February 16 2017 said:
    More BARF . . . . . .until they realize that they are loosing the market share, while prices are not climbing . . . . .
  • Scott Leach on February 16 2017 said:
    Right on cue...can expect the OPEC jawboning now every Thursday in between API/EIA bearish report and the drill count on Friday. Who buys into this crap?

    It can no longer be called "jawboning". It's blatant BS time and you can set your watch by it!
  • Justin on February 23 2017 said:
    Wouldn't call record compliance jaw boning or BS. They can gain market share at the cost of prices but I don't think they can afford that game for much longer. Shale oil is not really profitable below 50$/bbl. Companies that are profitable below that level are doing so because service/drilling companies are fighting for market share by losing money on jobs which will not continue indefinitely. 70$ oil this year is possible/unlikely but 50-60$/bbl is basically a given.

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