Led by Saudi Arabia, OPEC Output Drops in January
The 10 Organization of the Petroleum Exporting Countries (OPEC) members obligated to reduce oil output under the landmark agreement signed late last year achieved 91% of their required cuts in January, with their production falling 1.14 million barrels per day from October levels, according to the latest survey of OPEC and oil industry officials and analysts by S&P Global Platts.
Those cuts were, however, offset partly by output gains in Libya and Nigeria, which are exempt from the accord, and Iran, which is allowed to increase its production slightly.
“The market has taken early indications of compliance with the OPEC/non-OPEC production agreement bullishly, and, indeed, the cuts that OPEC made in January look strong so far. But as we are just barely into the six-month deal, it’ll take a few more months of monitoring to know whether the discipline that OPEC is displaying will hold,” OPEC specialist of S&P Global Platts Herman Wang said.
In all, OPEC’s 13 members — not including Indonesia, which suspended its membership at the group’s last meeting — produced 32.16 million barrels per day in January, a 690,000 barrels per day decline from December, the S&P Global Platts survey showed.
With Indonesia, the organisation’s January production totaled 32.89 million barrels per day. Under the agreement, OPEC pledged to cut 1.2 million barrels per day from its October output levels for six months starting from January 1 and freeze production at around 32.5 million barrels per day, including Indonesia. Eleven non-OPEC countries led by Russia have also agreed to cut output by 558,000 barrels per day in the first half of 2017.
The survey shows that several OPEC countries covered by the agreement still need to make some progress in lowering output to their allocations, though the over compliance of Saudi Arabia, Kuwait and Angola helps compensate. Since the deal covers an average of January to June output, some month-to-month fluctuations are to be expected. Riyadh has backed up the strong words of Saudi Energy Minister Khalid al-Falih, who played a key role in negotiating the agreement, with its January production falling to 9.98 million barrels per day, according to the Platts survey.
Iraq, which had sought an exemption from the deal, has the most barrels to cut to reach its allocation, with January output at 4.48 million barrels per day, according to the survey, while its quota is 4.35 million barrels per day.