OPEC And Allies Further Eased Oil Production Cuts In July

OPEC and its Russia-led non-OPEC partners in the production cut deal reduced their total oil production in July by 9 percent more than what they had agreed upon, Reuters reported on Monday, citing two sources familiar with the findings of an OPEC/non-OPEC monitoring committee on compliance.

The committee—consisting of representatives from the two leaders of the OPEC and non-OPEC groups, Saudi Arabia and Russia, respectively, as well as from Kuwait, the UAE, Algeria, Venezuela, and Oman—found on Monday that total production was just 9 percent above the agreed upon compliance of 100 percent, and compares with a compliance rate of 120 percent in June and an overzealous 147 percent in May, so the parties to the pact have been raising production, according to Reuters.

In June, OPEC and its non-OPEC partners agreed to work toward an overall conformity level of 100 percent as of July 1, 2018, compared to the 147-percent compliance rate in May.

OPEC-only production in July rose by 40,700 bpd from June, to 32.323 million bpd, according to secondary sources in the cartel’s Monthly Oil Market Report. While falling production in Libya and Iran was not so surprising, Saudi Arabia’s production dropped in July by 52,800 bpd from June to average 10.387 million bpd last month, according to OPEC’s secondary sources. Some analysts attributed the lower Saudi production to a lower than previously expected demand for Saudi crude.

Related: Aramco To Lose ‘Forever-Right’ To Saudi Oil Resources

While OPEC and allies report on their overall compliance levels, the two archrivals in the Middle East and major oil producers within the cartel—Saudi Arabia and Iran—have quite different views on what the vague June agreement actually means. The Saudis say that it implies a redistribution of quotas with individual caps on production, along with a collective 100-percent compliance rate. Iran, however, insists that no country can compensate for others.

Last week, Iran warned OPEC that “no country can overtake the production and export quotas of other member states under any circumstances,” while Iran’s Oil Minister Bijan Zanganeh was quoted as saying that “Some members are interpreting the latest OPEC decision on oil output differently ... and are acting in accordance with the policies of the U.S.”

By Tsvetana Paraskova for Oilprice.com

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