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OPEC+ is reportedly close to agreeing on an extension of the deep production cuts it signed up for in April, after the cartel’s leaders managed to convince Iraq of the continued need for oil production control, Bloomberg’s Javier Blas and Grant Smith write.
There have been doubts about the future of the cuts because earlier reports said that Russia may not be on board with them. Then Iraq came to the fore as a stumbling block.
Bloomberg reported yesterday that Saudi Arabia and Russia were getting increasingly fed up with OPEC’s number-two’s consistent failure to comply with its production quotas.
“Riyadh and Moscow are not kidding about implementing some form of compliance-improvement mechanism,” Rapidan Energy Group founder Bob McNally told Bloomberg. “Without it, they walk.”
According to the Bloomberg report, Saudi Arabia and Russia are running out of patience with Iraq and anyone else falling short of their targets. They are insisting that the laggards not only keep to their quotas but that they cut deeper in the coming months to make up for their earlier shortfalls.
This internal discord in the cartel sparked worry about the future of the deal. If one member of OPEC believes it can pump more than its quota, then what is to stop others from doing the same, the argument runs. And we have seen it before, when it was again Iraq falling short of its production targets prompting other OPEC members to voice their disgruntlement with the fact.
But now, according to one delegate who spoke to Bloomberg, this has been settled now and the OPEC+ club will meet on Saturday to make it official that the 9.7-million-bpd in production cuts will be extended to the end of July, when, according to Russia’s Energy Minister, the oil market could swing into a shortage of 3 to 5 million bpd.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.