OPEC deal depends on member compliance with quotas: IEA
The recent deal of OPEC and its allies in making additional cuts to their collective oil production depends on full compliance of the 24 members in their respective quotas, according to International Energy Agency (IEA) on Thursday.
The 14-members of OPEC and the Russia-led 10 members of non-OPEC agreed on Dec. 6 to lower their total output by another 500,000 barrels per day (bpd), which increases the total production curb of the group dubbed as OPEC+ to 1.7 million bpd starting from Jan. 1.
OPEC heavyweight Saudi Arabia said it would also make a voluntary cut of 400,000 bpd from its individual production level.
"Saudi Arabia once again showed its willingness to shoulder a greater burden by volunteering an additional reduction of 0.4 million bpd to take the total cut to 2.1 million bpd, effective 1 January," the IEA said in its Oil Market Report for December published on Thursday.
"The voluntary cut by the Saudis has already been partially delivered but the overall effectiveness of the OPEC+ agreement depends on the willingness of all its parties to fully comply, including those whose compliance so far has been less rigorous," it added.
Among OPEC members, Iraq and Nigeria recently produced above their respective output levels and failed to meet their quotas that were determined in the December 2018 deal.
Russia, which leads non-OPEC, also failed to meet its quota in September and November as its condensate oil production from natural gas wells rose due to higher gas output over the winter season.
Moscow's issue, however, was resolved during the OPEC+ meeting last week when it was agreed that Russia's condensate output would not be included in its oil production quota.
"This revised deal excludes from the production ceiling 1.5 million bpd of condensate output by non-OPEC producers. Russia, in particular, now has 0.8 million bpd of supply that can legitimately be increased," the IEA said.
The agency, however, warned that even if the 24 members of OPEC+ adhere strictly to the cut, a strong build in oil inventories during the first half of 2020 is still likely.
"OPEC pumped 29.66 million bpd of crude during November, down 300,000 bpd month-on-month and that rate would fall to around 29.3 million bpd in January based on full compliance and steady output from Libya, Iran and Venezuela," the report said.
"That is still 700,000 bpd above the first quarter of 2020 call on OPEC crude and 1 million bpd above the second quarter call," it added.
Below are the additional 500,000 bpd output curb adjustment figures for the OPEC+ members, excluding Ecuador, Venezuela, Iran and Libya, released by OPEC, effective as of Jan. 1
COUNTRY / ADJUSTMENT (thousand barrels per day)
Equatorial Guinea /1
Saudi Arabia /167
United Arab Emirates /60
OPEC TOTAL / 372
South Sudan /1
NON-OPEC TOTAL /131