OPEC agreed in Vienna that it would roll over its 1.2 million b/d crude oil production cuts for another nine months, which would keep the agreement in place until end-March 2020.
On Tuesday, the oil cartel discussed the cooperation of non-OPEC producers, the key member of which is Russia. Both Saudi Energy Minister Khalid al-Falih and Russian President Vladimir Putin had already said at the G20 summit in Japan that they were in agreement on the rollover, so OPEC+ cooperation was more or less a formality.
The cuts promised by OPEC+ are already in place and there is little reason to expect any overall slippage. Saudi Arabia in May was producing about 600,000 b/d under its cap. Venezuela remains mired in an economic crisis that has severely eroded the operational capabilities of state oil company PDVSA. Iranian exports are strictly bound by US sanctions, and the Arab Gulf kingdoms will follow Saudi Arabia’s lead.
Other OPEC members have little spare production capacity. Iraq has been producing about 300,000 b/d above its cap and remains the compliance bad boy, but it is restricted by domestic infrastructural limits on crude production and exports. Russia’s output in the short term is curbed by the clean-up operations relating to the contamination of crude in the Druzhba oil pipeline.
The possibility of OPEC implementing deeper cuts was rejected largely on the basis of a softening of the US-China trade war. At the G20 summit,…