OPEC announced this afternoon its members will target 100% compliance with its 1.2 million barrels per day (MMBPD) reduction agreement — actually increasing daily production by 600,000 Bbls, since the cartel chopped an extra 600,000 BPD in May, Kallanish Energy reports.
The 14-member group analyzed oil market developments since the organization’s last meeting in Vienna at the end of November, and reviewed the outlook for the remainder of 2018, during its 174th OPEC conference, after a week of speculation a deal would be reached at all.
“The oil market situation has further improved over the past six months, with the global economy remaining strong, oil demand relatively robust, albeit with some uncertainties, and with market rebalancing evidently continuing,” said OPEC President Suhail Mohamed Al Mazrouei, at a Friday afternoon press conference.
A collective agreement was indeed doubtful given Iran’s voiced opposition to OPEC’s proposal to boost oil output by 1 million barrels per day (MMBPD) beginning in July. After Iran softened its stance, a deal was reached, but the market is waiting on specifics.
The secretive announcement doesn’t say how much production will be raised by, nor sets individual allocations to each member. Al Mazrouei said the issue of overcompliance has been resolved with this decision to continue the agreement till year-end, maintaining the compliance level at 100%.
He avoided placing a number on the approved increase and told the press to make their own calculations, while giving them his assurance “there will be no negative surprises” and that each country will comply appropriately.
The member countries went home without an official quota/allocation of how much they could produce, with Al Mazrouei suggesting it’s “challenging” to work on individual basis
The joint monitoring committee will continue to do its job and ensure production is capped at 1.2 MMBPD from OPEC. The non-OPEC participants will decide tomorrow how much of their 600,000 BPD cut will be maintained.
The release of the barrels will be done by those members who have spare capacity such as Saudi Arabia, with 2 MMBPD of excess capacity. Production will also be met by OPEC’s newest member, the Congo.
Joseph F. Barone