Oil & Gas
For OPEC supply cap deal, the centre cannot hold
by ISAAC ANYAOGU
September 13, 2017 | 12:45 am| | | Start Conversation
In recent times, parties to the agreement to cut 1.8 million barrels per day production reached last year are calling for a review of the deal following high global inventories and slow recovery of oil prices.
OPEC convened a meeting in August due to concerns parties to the deal including, Iraq and the UAE as well as non-OPEC signatories to deal with Kazakhstan and Malaysia may be pumping more crude oil than the volume they are expected to cut.
Iraq refutes this. OPEC’s second biggest producer says it is currently producing 4.32 million bpd of oil, below the 4.351 million bpd ceiling it had pledged in the production cut deal. Jabbar Al-Luaibi, Iraq’s Oil Minister said last week that the country was sticking to its commitment.
However, oilprice.com, an energy news website reports that despite Iraq’s optimism, its central government does not yet have the full picture of the oil exports of the Kurdistan Regional Government, Al-Luaibi said after meeting with Russia’s Energy Minister Alexander Novak in Moscow.
Iraq’s oil exports are up to 3.23 million bpd, Al-Luaibi told reporters, adding that Kurdish crude exports are at between 300,000 bpd and 350,000 bpd. Russia and Venezuela, also parties to the deal, have called on OPEC to bring Nigeria and Libya’s production under quota. During the meeting in August, the parties agreed to monitor expanding supplies from Nigeria and Libya, both of which have been exempted from the agreement due to production disruption in their countries.
It would seem the patience of the group is worn thin. Igor Sechin, chief executive officer of Russia’s top oil producer Rosneft, told TASS news agency that it is important to pay attention to the fact that Nigeria and Libya are not participating in the deal.
Eulogio Del Pino, Venezuelan Oil Minister raised fears that global oil inventories now necessitate a renegotiation of the OPEC production cut deal. Del Pino also told reporters at an energy conference in Kazakhstan that inventories remained roughly 300 million barrels higher than normal levels.
Pino said that those 300 million barrels are going to impact speculation in the market. The level of inventories is still very high. He then called for Libya and Nigeria, two African countries that received exemptions from the OPEC agreement due to long periods of civil strife, should be put under quotas as well.
However the issues may be more nuanced than just the non-inclusion of Nigeria and Libya in cutting production. Sechin said in an interview with TASS news agency that the effect of the dollar’s devaluation on the oil market is currently higher than that of the OPEC crude production cut agreement.
Sechin admitted that it is necessary to thoroughly analyze all factors affecting the oil market before considering the issue of extending the deal with OPEC and non-OPEC nations on crude production cut.
“In order to discuss the issue, it is necessary to analyze all factors that will be effecting the market next year very thoroughly. This is first of all the assessment of budgets, investment programs of biggest oil producers, tax level,” he said.
“I wonder which factor is stronger now – the OPEC deal or the dollar’s devaluation. The Americans are supporting their shale producers through the dollar’s devaluation. I think that the effect of the dollar’s devaluation is stronger than the OPEC deal.”
Meanwhile, Nigeria has shown that it is not averse to joining the cuts but has argued that it must recover production to levels before the rave of militancy cut nearly million bpd production.
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