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OPEC Compliance With Output Cuts Was Only 74% In May

Not even a full month into OPEC’s deep production cut agreement, rumors have already surfaced that there is a difference of opinion over a possible extension of the oil production cuts—as usual, with Saudi Arabia on one side and Russia on the other.

But those discussions seem premature, given the latest Reuters survey that suggests that the cartel failed to fully comply with its agreed-upon quotas in May.

According to the survey data, Nigeria and Iraq did not live up to their commitments under the massive production cut deal that promised to take 9.7 million barrels of oil production per day out of the oversupplied market.

Overall, the survey showed the group cut just 5.91 million bpd from April levels, producing 24.77 million bpd. This is 4.48 million bpd of the promised reduction, or 74% compliant.

While some have suggested that the reason for OPEC’s failure to bring production down to promised levels is due to contractual obligations with buyers given the short timeframe between the date the agreement was made and its implementation, Iraq has a history of production quota noncompliance.

For May, Iraq reached just 38% compliance with its promised cuts.

Nigeria was even less faithful to the quotas, cutting just 19% of what it promised, according to the Reuters survey.

Despite the few members who failed to being production down as low as promised, OPEC’s overall May production was the lowest that it’s been since 2002, according to Reuters.

The sharp cuts in May, however, are watered down by the fact that several OPEC members, including Kuwait, the UAE, and Saudi Arabia, produced record-high volumes in April, which flooded the market while the world was beginning to see what was a massive drop off in demand.

By Julianne Geiger for Oilprice.com

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  • Mamdouh Salameh on May 30 2020 said:
    One thing is clear. Saudi Arabia shouldn’t be saddled with the bulk of the OPEC+ production cuts. Still, OPEC+ in a typical fashion will slowly but surely reach full compliance with the cuts.

    For the time being, the decline of an estimated 4 million barrels a day (mbd) from US oil production (primarily shale oil) more than compensates for OPEC’s deficit.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Maxander on May 30 2020 said:
    That means 100% compliance from OPECs is yet to come in June, July & to fulfill entire 100% compliance, it may even cut production by 126% of proposed to cover compliance of lower 74%.
    I think they would go for it because crude oil prices falling below 0 is more than just a nightmare. It's a shock not to be forgotten any time in coming future for OPECs.

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