OPEC to meet with non-OPEC pro­duc­ers to dis­cuss weaker cuts com­pli­ance

Muscat Daily - - BUSINESS -

Kuwait City, Kuwait - Rep­re­sen­ta­tives of some OPEC and nonOPEC na­tions will meet in Abu Dhabi from Au­gust 7-8 to dis­cuss why some of them are fall­ing be­hind in their pledges to cut pro­duc­tion, ac­cord­ing to an OPEC state­ment.

The meet­ing, co-chaired by Kuwait and Rus­sia, will ex­am­ine rea­sons why some coun­tries aren’t fully im­ple­ment­ing their cuts, it said. Some na­tions will ar­gue that the in­de­pen­dent sources used by OPEC to as­sess com­pli­ance over­es­ti­mate their pro­duc­tion, ac­cord­ing to two peo­ple fa­mil­iar with the mat­ter, who asked not to be iden­ti­fied.

Tar­gets for out­put re­duc­tion are based on pro­duc­tion es­ti­mates from six in­de­pen­dent par­ties, known as ‘sec­ondary sources’. Last year, as the deal was be­ing ne­go­ti­ated, Iraq com­plained about these es­ti­mates, claim­ing they aren’t ac­cu­rate. Other mem­bers of the Or­ga­ni­za­tion of Petroleum Ex­port­ing Coun­tries are also putting the blame on sec­ondary sources for their poor per­for­mance, said two peo­ple.

The agree­ment, which came into ef­fect at the start of the year, brings to­gether OPEC and non-OPEC na­tions in an ef­fort to take as much as 1.8mn bar­rels of oil a day off the mar­ket. While com­pli­ance was high in the first months of the pact, it be­gan to slide as the ex­pected crude­price re­cov­ery failed to ma­te­ri­alise.

Some non-OPEC na­tions have been in­vited to the Abu Dhabi meet­ing but have yet to con­firm their pres­ence, one of the peo­ple said. OPEC mem­bers Al­ge­ria and Venezuela - who sit on the com­mit­tee that over­sees com­pli­ance - won’t at­tend, two peo­ple said. Al­ge­ria’s im­ple­men­ta­tion so far this year was at 70 per cent, while Venezuela’s av­er­aged 39 per cent, ac­cord­ing to the In­ter­na­tional En­ergy Agency.

Saudi Ara­bia, OPEC’s big­gest pro­ducer and its de-facto leader, said this week it planned to step up pres­sure on na­tions that aren’t com­ply­ing with their com- mit­ments. The fol­low­ing day, the UAE, an­other coun­try which hasn’t fully im­ple­mented its own cuts, pledged fur­ther re­duc­tions from Septem­ber.

Iraq, the sec­ond-big­gest pro­ducer in OPEC, will also at­tend the meet­ing, the peo­ple said. It has pre­vi­ously ar­gued that it should have been ex­cluded from cuts be­cause of its bat­tle against Is­lamic State.

OPEC na­tions Libya and Nige­ria have been ex­empted as they try to re­store pro­duc­tion curbed by in­ter­nal con­flict, and Iran, freed from in­ter­na­tional sanc­tions, has also been per­mit­ted to in­crease out­put.

Iraqi com­pli­ance slumped to 29 per cent in June, its low­est so far, while the UAE made just 60 per cent of its cuts, ac­cord­ing to the IEA’s last monthly re­port. Over­all im­ple­men­ta­tion weak­ened to 78 per cent from 95 per cent in May af­ter mem­bers in­clud­ing Saudi Ara­bia boosted out­put.

While OPEC’s June com­pli­ance slipped to its low­est, the av­er­age rate dur­ing the first six months of the pact was 92 per cent, which is ‘still strong by his­tor­i­cal stan­dards’, the IEA said.

Rep­re­sen­ta­tives of some OPEC and non-OPEC na­tions will meet in Abu Dhabi from Au­gust 7-8

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