OPEC Will Force Overproducing Members To Comply And Compensate

0

CBN

 

OPEC has had to remind once again the laggards in compliance in the OPEC+ oil production deal to submit plans on how they will compensate for pumping above their respective quotas in recent months, sources at OPEC told Energy Intelligence this week.

There are 10 producers in the OPEC+ alliance who have overproduced beyond their allowances since the latest pact became effective on May 1 last year. Of those 10 producers, as many as seven have yet to submit plans to the OPEC Secretariat on how they plan to compensate for breaching their quotas, the sources told Energy Intelligence.

At the latest ministerial meeting of OPEC+, the ministers noted at the end of April that all countries “pledged to achieve full conformity and make up for previous adjustment shortfalls during the extended compensation period, which runs through the end of September 2021, and stressed the importance of accelerating the market rebalancing efforts without delay.”

According to Oilprice.com,the ministers, however, noted that some countries “have yet to achieve the minimum expectation of 100% conformity and to compensate for overproduced volumes,” OPEC said.

Among those laggards, Iraq, Equatorial Guinea, and Gabon have submitted plans for compensation schedules, but Russia, Congo, Azerbaijan, Brunei, Kazakhstan, Sudan, and South Sudan have not, OPEC sources told Energy Intelligence.

As per estimates by Energy Intelligence, in the year after the OPEC+ pact was implemented, OPEC members overproduced by 120,000 barrels per day (bpd), while non-OPEC members produced just over 180,000 bpd over their combined quotas. Russia is estimated to be the OPEC+ producer that has overproduced the largest volume between May 1, 2020, and April 30, 2021, pumping at 80,000 bpd above its quota on average for the year to end-April.

According to Energy Intelligence’s sources, Russia thinks that complying at around 95-96 percent is good enough. The other key member of the OPEC+ alliance, Saudi Arabia, has started to accept that the lack of full Russian compliance could be the price to pay for keeping Moscow firmly supporting and participating in the production cut deal.

Meanwhile Russia estimates that the global oil market is currently in a deficit of around 1 million barrels per day (bpd), Deputy Prime Minister Alexander Novak said on Wednesday.

“There is a deficit on the market of around 1 million bpd and we need to consider how we can meet the growth in demand,” Novak told reporters in Russia, as carried by news agency TASS.

Last week, Novak said that the oil market was fairly balanced, with demand slightly exceeding supply.

“There is definitely a deficit on the market, that’s why oil stocks from last year are drawing down toward the five-year average,” the deputy prime minister told reporters last week.

Russia, as OPEC’s key partner in the OPEC+ production deal, is ramping up its oil production between May and July, as per the group’s agreement to gradually return over 1 million bpd to the market between May and July. Saudi Arabia will also reverse its extra unilateral cut of 1 million bpd in that period.

The monthly meeting of the ministers of the OPEC+ alliance to take stock of the market situation and compliance rates is scheduled to take place next week, on June 1.

OPEC+ bears in mind the possibility of a return of Iranian oil to the market in the short term, Novak said today.

Iran has the potential for recovery, and the alliance will need to calculate the balance of demand and supply considering Iran, when and if sanctions are lifted, Russia’s top oil policy diplomat said.

Indirect talks between the U.S. and Iran and talks with the countries part of the Iranian nuclear deal resumed in Vienna on Tuesday. Mikhail Ulyanov, who leads the Russian delegation at the talks, said on Tuesday that “The Joint Commission opened today the fifth and probably final round of the Vienna talks on restoration of the JCPOA.”

“The participants expressed readiness to do their best to resolve the remaining outstanding issues and to complete negotiations successfully as soon as possible,” Ulyanov added.

Leave a Reply

Your email address will not be published. Required fields are marked *