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OPEC Compliance Hit 136% Before Talks Failed

OPEC+ oil producers overcomplied with their collective production cut deal in January, thanks to overcompliance from OPEC members, Russia’s TASS news agency reported on Friday, quoting two sources in OPEC+ delegations.

According to those sources, OPEC and its non-OPEC partners led by Russia saw their combined compliance rate at 112 percent in January, compared to 145 percent in December. The means that the OPEC+ group reduced their collective oil production by a combined 1.9 million barrels per day (bpd), compared to an agreed cut of 1.7 million bpd as per the deal forged in December 2019.

While OPEC producers overcomplied with a compliance rate of 136 percent in January, the non-OPEC producers which include Russia had their compliance at 55 percent in the first month this year.

Compliance rates in both the OPEC and non-OPEC camp fell from December, but the agreed cuts in January were larger than those in December.

Russia’s production of crude oil and condensate in January, for example, inched up to 11.28 million bpd, up from 11.26 million bpd in December for the highest production level since August last year. Russia’s production data include condensate which Moscow managed to have removed from its quota as of January.

The compliance rate in January highlights that fact that the OPEC producers were and still are much more motivated to overcomply with the production cut deal than the Russia-led non-OPEC group.

Despite the collective overcompliance, the coronavirus outbreak caught OPEC and its allies off guard and they passively watched oil prices slide as more evidence of demand destruction piled up.  

OPEC and its non-OPEC partners are meeting in Vienna on Friday to discuss a deeper collective cut of 1.5 million bpd until the end of 2020 in response to the loss in demand. At the time of this writing just after 1. p.m. Vienna time, Russia continued to be the holdout to a deal, still refusing to join deeper cuts.  

By Tsvetana Paraskova for Oilprice.com

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