…As Iraq remains the ‘bad boy’ of the cartel
Organization of Petroleum Exporting Countries, (OPEC) has resolved to exercise critical compliance control on members after it came up with a resolution on Friday to deepen production cut by members. Nigeria is one of the countries accused of flouting decisions on oil production cuts
Rising from its annual meeting in Vienna last week, OPEC said it was a bit satisfied with Nigeria’s compliance level, it expressed worry that the country has oftentimes reneged in its production cut agreement. “OPEC’s ‘whatever it takes’ strategy has so far meant that Saudi Arabia would make additional production cuts where non-complying members failed,” Oriental News reported yesterday.
The report said that some members are banking on OPEC employing that strategy again, and are using it as negotiating leverage. Aside Nigeria, there are other chronic non-compliant OPEC members including Congo, Ecuador and Gabon, which were tasked with cutting a collective 85,000 barrels a day, bpd from their reference range.
Nigeria was supposed to be cutting 53,000 bpd of that 85,000 bpd, failed to comply with the cuts all year, and despite promising on October 1 to finally rein in its production to 100% compliance, its October production was 1.811 million bpd, well above its target of 1.774 million bpd, according to the latest version of OPEC’s Monthly Oil Market Report.
Nigeria has, however, increased its compliance in the last few months, compared to August when Nigeria produced an average of 1.870 million bpd. The report said Nigeria has renewed its commitment to the OPEC deal, and the downward trend for its production over the last few months suggests that it just might be sincere, the report said
It also has stated that its November production was indeed at the proper levels according to S&P Global Platts. Official figures, however, from OPEC have not yet been released for November. “So, for Nigeria, OPEC may not have to do much, other than the nonspecific pressure it has already been putting on the nation to comply,” Oriental News said
Other non-OPEC signatories to the deal that have overproduced their targets are Malaysia, tasked with cutting 15,000 bpd; and Oman, tasked with trimming 25,000 bpd, according to Bloomberg. Of these, Malaysia’s overproduction is most concerning, overproducing by 77,000 bpd in October. Malaysia’s state-run oil company, Petronas, saw its Q3 profit fall by 50% in part due to a “lower sales volume” of crude oil, but also due to lower oil prices as global oil inventories remained high.
Further deals, such as the petrochemical joint venture between Saudi Arabia and Petronas in Pengerang, couldn’t hurt when it comes to prodding Malaysia to produce less. It is unlikely that OPEC will bring more members into the full-compliance fold, aside from perhaps Nigeria. Saudi Arabia, however, is still able to carry the brunt of the production cuts, and it is motivated no matter what it says to continue to do so, despite the cheating ways of its lesser motivated peers.
The new threat is that compliance will have to be real this time around from all members or the cuts won’t happen at all. How successful OPEC will be in getting its noncompliant members to step in line, and how it will go about doing that remains to be seen.
Iraq is alleged to be the key defaulter in the OPEC cartel. The country has consistently and significantly failed to adhere to the cuts, reports say. Despite this lack of follow through with the cuts, Iraq is in full support of deeper and longer cuts. The country produces more oil than any other OPEC member except for Saudi Arabia.
Iraqis production is said to have doubled over the last decade, according to the EIA, and it produces nearly 5% of the world’s oil. Aside from Saudi Arabia, no other OPEC member has as much production cut clout as Iraq.
By Chibisi Ohakah
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