OPEC compliance with oil curbs rises in March as UAE joins cut
LONDON/ DUBAI: OPEC oil output is likely to fall for a third straight month in March, a Reuters survey found, as the United Arab Emirates made progress in trimming supplies while maintenance and unrest cut production in exempt nations Nigeria and Libya.
The reduction by the UAE has helped boost OPEC compliance this month with its production-cutting deal to 95 per cent, up from an initial February estimate of 94 per cent and a record high, according to Reuters surveys.
The Organization of the Petroleum Exporting Countries pledged to reduce output by about 1.2 million barrels per day (bpd) from Jan 1 – the first accord on supply curbs since 2008. Non-OPEC countries pledged to cut about half as much.
In comments made to Reuters, OPEC Secretary-General Mohammad Barkindo said the OPEC and non- OPEC agreement “is gradually, but steadily working its way to restore balance to the oil markets”.
“The rebalancing process is already underway,” he added.
OPEC wants to end a glut that is keeping oil below US$52 a barrel, half the level of mid-2014.
But stocks are still high despite strong OPEC compliance, boosting expectations that the group will seek to prolong the agreement.
“OPEC is now facing the prospect of falling short of its objective,” said Stephen Brennock of oil broker PVM. “Bulging global oil stockpiles will not draw down to the five-year average unless OPEC-led cuts are extended.”
Compliance of 95 per cent is higher than OPEC achieved in its last cut in 2009, Reuters surveys show.
Analysts including those at the International Energy Agency have put adherence in 2017 even higher, with the IEA calling it a record.
March’s biggest reduction came from the UAE, which was slower than Kuwait and Saudi Arabia to trim supply.
Output is lower this month because more cuts have been implemented and due to planned maintenance, industry sources say.
After limited reductions earlier in 2017, UAE officials and industry sources have said the country would improve average compliance during the six-month duration of the supply cut.
The Reuters survey showed Saudi Arabia’s output rose slightly in March from a large reduction in February.
Even with March’s increase, the total curb achieved is 564,000 bpd, well above the target cut of 486,000 bpd.
As a result, Saudi Arabia, Kuwait and as of this month, the UAE, compensated for the weaker adherence of other members, including Algeria, Ecuador, Gabon and Venezuela. — Reuters