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The OPEC+ group complied 101 percent with the oil production cuts in October, keeping a high level of conformity ahead of the crucial meetings over the next two weeks, which will decide if the alliance will reverse course on easing the cuts given the worsening demand outlook.
The compliance last month has been estimated at 101 percent, three sources at OPEC+ told Reuters on Friday.
This assessment is subject to official review by the Joint Technical Committee (JTC) of OPEC+, which is meeting on Monday, November 16, a day before the monthly meeting of the Joint Ministerial Monitoring Committee (JMMC) scheduled for Tuesday.
In September, the overall compliance of the OPEC+ pact participants was at 102 percent, the highest since May 2020, the JMMC said after its meeting in October, when it urged full compliance with the quotas and “reminded all participating countries of the necessity to be vigilant and proactive given the precarious market conditions and prospects.”
The market conditions and prospects have become even more precarious in the month since the mid-October meeting, as major economies in Europe re-imposed various forms of lockdowns and curfews to fight the renewed spike in COVID-19 cases. Earlier this week, OPEC revised down its expectations for global oil demand—its fifth consecutive downward revision—as the coronavirus resurgence is slowing down the oil demand recovery.
Slowing demand recovery and a surge in production among OPEC’s own, exempt member Libya, after an eight-month-long port blockade, is prompting the OPEC+ group to reconsider its plans for easing the current cuts by 2 million bpd in January.
Next week’s JMMC meeting doesn’t have the authority to change a deal, but it can recommend actions to the full OPEC+ meeting scheduled for December 1, with an OPEC meeting set for November 30.
OPEC+ is now considering a three- to six-month delay to the originally scheduled ramp-up, while a deeper cuts option has failed to gain much traction, delegates told Bloomberg this week.
By Charles Kennedy For Oilprice.com
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Charles is a writer for Oilprice.com
At this stage, there is no need for deepening the cuts unless the pandemic worsens in the next six months. Furthermore, there is no appetite among members of OPEC+ for deeper cuts.
OPEC+ should not worry unduly about Libya’s return to the market. Even if Libya manages to raise its production to 1 mbd, it can’t sustain it even for one month. The country’s major oilfields and oil infrastructure are badly in need of urgent maintenance some of which have been idle for years. Furthermore, the truce between the warring factions is very tenuous.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London