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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Saudis No Longer Willing To Compensate For OPEC+ Cheaters

OPEC’s largest producer and de facto leader Saudi Arabia will likely tell fellow producers in the OPEC+ pact next week that the Kingdom would no longer tolerate and compensate for cheating on assigned production quotas, Bloomberg reported on Friday, citing people with knowledge of the current Saudi position.   

While other members in the cartel, notably Iraq and Nigeria, have repeatedly exceeded their respective production caps by more than 100,000 bpd, Saudi Arabia has not only stuck with its share of the cuts, but has also overcomplied by more than 400,000 bpd—bringing the total reduction of the Kingdom at more than 700,000 bpd in recent months.

At his first full OPEC summit as Saudi Energy Minister, Prince Abdulaziz bin Salman is expected to take a harder line on non-compliant producers than his predecessor Khalid al-Falih, whose “whatever it takes” to balance the market meant that the Saudis were inclined, for some time, to compensate for rogue OPEC members.

Saudi Arabia is reportedly pressuring non-compliant cartel members to fall in line with their share of the cuts, instead of pushing aggressively next week for a deeper overall cut to rebalance the market. Deeper cuts would mean the Saudis would have to take the lion’s share of cuts, again.

Yet, the tougher stance on non-compliant producers could further complicate the OPEC+ talks next week, because OPEC and Saudi Arabia’s key ally in the pact, Russia, has also had a sketchy compliance record this year. Related: The Natural Gas Nation Every Exporter Is Targeting

Russia has been slow to comply with its share of cuts, pumping slightly above its quota in recent months, and missing its production target in October yet again, despite promises that it would fall in line.

Russia’s non-compliance extending into November could further complicate talks next week. The Saudis are going the extra mile by cutting 400,000 bpd more than they are expected to, but it has been thanks to Russia that the pact has held for three years now.

The Russians have a grievance about the pact that they are likely to take up with their OPEC allies. Russia could discuss with its OPEC partners the exclusion of gas condensate from its cap, as condensate isn’t exported, while it is included in Russia’s oil production statistics, Energy Minister Alexander Novak said last week. This week, the minister added that Moscow hasn’t asked the OPEC+ group for this yet. Russia tries to keep in line with its quota, but increased gas condensate output prevents it from doing so, Novak said on Thursday.

By Tsvetana Paraskova for Oilprice.com

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  • Mamdouh Salameh on November 29 2019 said:
    Even if Saudi Arabia manages to persuade Iraq and Nigeria to stick to their share of the agreed production cuts, this could only reduce less than 400,000 barrels a day (b/d) from a market glut estimated at 4.0-5-0 million barrels a day (mbd).

    The key to oil prices and the glut in the market lies in the continued trade war between the United States and China. As long the trade war continues, the glut will also stay with even the possibility of increasing.

    The recent US legislation relating to Hong Kong is considered by China a blatant interference in its internal affairs. This will harden China’s attitude towards a deal to end the war. Having already won the war, China will be very disinclined to help end the war because it has lost all confidence in President Trump’s word and his mercurial behaviour.

    OPEC + can only agree to extend the current production cuts by a few months but it will never agree to deepen the cuts because such a measure is futile as it only causes it to lose market share with no positive impact on prices. Furthermore, Russia will never agree to that.

    Saudi Arabia needs an oil price above $80 to balance its budget

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • james pertz on November 29 2019 said:
    Oil $40 in 2020. $30 in 2021.
    Between OPEC non-compliance, new megafields going online, and ever resilient shale production, prices will continue to fall.
  • John Di Laccii on November 29 2019 said:
    Poor poor Saudis, such a humane creatures, noone is listening to them, my heart is bleeding. They are so good people, they like our young blonde virgins, they like knives, Selafi teachings and beheadings, they like MBS, neatly clipped nails and their beards with no mustaches, they like pumping their vives, and now all of a sudden, the rest of the OPEC is cheating on them. Who said they resemble animals? Life is realy not fair and very cruel.

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