Crude prices are testing $60 a barrel with OPEC holding the line on output cuts. That doesn’t bode well for tensions between Saudi Arabia and Russia.
The OPEC+ alliance of oil producers will face a big test of its cohesion in a few weeks’ time, when ministers meet to discuss the next step in their historic production deal aimed at rebalancing the world’s oil supply with recovering demand. Things have almost moved too quickly in their favor.
Recent increases in crude prices and the rapid drawing down of visible stockpiles will undoubtedly lead to calls for a more rapid raising of production targets than was envisaged in December. That may well reignite tensions between the co-leaders of the group, Saudi Arabia and Russia, with the potential for more brinkmanship that could undermine the price recovery.
The report card was very good when the producer group’s monitoring committee met last week to evaluate progress so far:
- Aggregatecompliance with the deal since it came into effect in May is at an unprecedented 99%
- Brent crude prices are testing $60 a barrel, a level not seen in more than a year
- Commercial oil stockpiles in the developed nations of the OECD are coming down and the group now expects them to fall below their five-year (2015-2019) average by August — a key target for Saudi Arabia
Walking the Walk
Overall compliance with the output cuts has been close to 100% for almost the whole life of the current deal
Source: OPEC+
Note: Compliance was boosted in June by voluntary additional cuts from Saudi Arabia, the UAE and Kuwait
How could anything possibly go wrong, you ask? Well,despite these successes, Saudi Arabia still seems obsessed with making every member but one honor their commitments to the barrel.After all, more than half of the countries that signed up to the output-cutting deal have failed to meet their obligations in full. And as has so often happened in the past, the lion’s share of responsibility for meeting the group’s goals has rested on Saudi Arabia, which, by December, had cut 37 million barrels more than it had signed up for originally.
Compliance
Over half of the OPEC+ countries have over-produced on average since May. Saudi Arabia, as ever has carried a disproportionate share of the burden
Source: OPEC+
Note: Compliance is measured in average barrels per day from the beginning of May to the end of December, the most recent month for which the OPEC+ group has assessed production
Read it from bloomberg – Photo as posted on Bloomberg (Back to work? Photographer: Karo Kes/iStockphoto)
