Energy Prospectus

Saudi Arabia To Force OPEC+ Overproducers To Compensate For 2.3 Million Bpd
By Tsvetana Paraskova - Aug 20, 2020, 12:30 PM CDT

The OPEC+ group has as much as 2.31 million barrels per day (bpd) of oil production above the collective quota for May-July to offset in August and September, Reuters reported on Thursday, quoting an internal OPEC+ document it had seen.

OPEC+ launched in May a record 9.7 million bpd production cut in response to the crash in demand in the pandemic. The cuts are being eased to 7.7 million bpd as of August 1, a month later than initially planned. Non-compliant members promised to offset their poor compliance between May and July with extra cuts in August and September.

The internal document Reuters has seen does not explain in detail how those extra cuts would be distributed in August and September. The estimates from OPEC+ show that Iraq was overproducing at a rate of 851,000 bpd between May and July—this was the least compliant member of the pact. Iraq has promised to cut much more to offset poor compliance, but its July production rose by 39,000 bpd to average 3.752 million bpd, according to OPEC’s latest Monthly Oil Market Report (MOMR).

Nigeria was also overproducing a lot between May and July, pumping 315,000 bpd above its ceiling, according to the OPEC+ document seen by Reuters.

Russia, the leader of the non-OPEC group in the OPEC+ coalition, was also producing above its quota – 283,000 bpd more than it should be in order to be in full compliance.

Related: Saudi Oil Minister: Oil Demand Could See A 97% Recovery By The End Of 2020

The Joint Ministerial Monitoring Committee (JMMC), which met on Wednesday, said it had requested other underperforming participating countries to submit their plans for implementation of the required compensation for the overproduced volumes to the OPEC Secretariat by the end of next week, August 28.

“The Committee emphasized that achieving 100% conformity from all participating countries in the DoC and compensating for the shortfalls in May, June and July 2020 is not only fair, but vital for the ongoing rebalancing efforts and to help deliver long-term oil market stability,” OPEC said at the end of the video meeting.

The OPEC+ panel also admitted that “the pace of recovery appeared to be slower than anticipated with growing risks of a prolonged wave of COVID-19.”

By Tsvetana Paraskova for Oilprice.com

Saudi Oil Minister: Oil Demand Could See A 97% Recovery By The End Of 2020
By Julianne Geiger - Aug 19, 2020, 4:00 PM CDT

Global oil demand is set to recover to near pre-covid-19 levels by the end of this year, Saudi Arabia’s energy minister Prince Abdulaziz said today prior to the OPEC+ Joint Ministerial Monitoring Committee meeting today, according to The National.

Specifically, Prince Abdulaziz expects that oil demand will recover to 97% of the levels pre-Covid.

That 97% is also the compliance rate that OPEC+ achieved in July, after promising to cut 9.7 million barrels per day off the group’s oil production levels.

Saudi Arabia has leaned hard on the members of the group that have not complied with the cuts to the same dutiful—and painful—level that Saudi Arabia has. The laggards of the group include Iraq and Nigeria, who have missed their quotas by large margins.

In response, Nigeria and Iraq—along with the other laggards Kazakhstan and Angola—have agreed to continue cut enough production to make up for ill compliance during the last couple of months.

“We should endeavor to put this temporary compensation regime behind us, by clearing all the past overproduction by the end of September,” Prince Abdulaziz said before the meeting.

But that would indeed be an ambitious undertaking for Nigeria and Iraq, who have had trouble complying to all OPEC agreements thus far, and who have not shared any specific plan to bring their oil production into compliance with the group’s agreement.

Regardless of the laggards’ poor showing, Prince Abdulaziz has noted that the oil market has shown signs of improvement with a drawdown in global inventories, a decline in floating storage, and a recovery in gasoline and diesel demand.

Oil prices were trading slightly down on Wednesday, even after the EIA reported crude oil and gasoline inventories draws for the week, and even after Prince Abdulaziz’s positive talking points.

By Julianne Geiger for Oilprice.com