OPEC and friends agree on way to monitor oil cut
OPEC and other oil producers agreed on a way to monitor compliance with last month’s historic supply deal, putting global markets on track to rebalance after more than two years of oversupply.
The countries already have cut oil supply by 1.5 million barrels a day, more than 80 percent of their collective target, since the deal took effect on Jan. 1, Saudi Arabia’s Minister of Energy and Industry Khalid Al-Falih told reporters in Vienna.
“Compliance is great — it’s been really fantastic,” Al-Falih said Sunday. “Based on everything I know, I think it’s been one of the best agreements we’ve had for a long time.”
Saudi Arabia, Kuwait, Qatar, Algeria and Venezuela met counterparts from non-OPEC nations Russia and Oman to find a way to verify that the 24 signatories to their Dec. 10 accord are fulfilling pledges to remove a combined 1.8 million barrels a day from the market for six months. They intended to prove the Organization of Petroleum Exporting Countries is serious about eliminating a global glut and dispel skepticism stemming from previous unfulfilled promises.
Kuwaiti Oil Minister Essam Al-Marzouk, who chairs the five-member monitoring committee, emerged smiling from the hourlong meeting with a message of success: oil producers were in “total agreement” on the monitoring mechanism and wouldn’t accept anything less than 100 percent compliance with the cuts.
The committee, comprising ministers from Kuwait, Russia, Algeria, Venezuela and Oman, will meet next on March 17 in Kuwait and again in May. OPEC’s secretariat will present it with a report on the 17th day of each month, the group said in a statement. A technical group, consisting of delegates from each of the five committee members along with OPEC President Saudi Arabia, will meet each month to prepare the report.
The monitoring committee will assess data submitted by each producer country, along with information from agencies such as IHS Cambridge Energy Research Associates, Argus Media Ltd. and the International Energy Agency, Russian Energy Minister Alexander Novak said. The committee will evaluate compliance with production targets only, though the technical group also may look at export data to support its analysis, Novak said.
Oil prices rose to an 18-month high of more than $58 a barrel after OPEC and several nonmembers agreed to end two years of unfettered production and instead cut output. Crude has since slipped about 5 percent from that peak as traders await proof that they will follow through.
Saudi Arabia, the world’s biggest oil exporter, has already exceeded its target with an output reduction of more than 500,000 barrels a day, Al-Falih said, while Algeria and Kuwait also have cut to levels beyond their targets, according to ministers from those nations. Other OPEC members such as Iraq and Venezuela have not yet reached their quotas but say they are more than halfway there.
Al-Falih said he hoped all countries would reach full compliance with the deal next month and forecast that brimming global stockpiles of crude oil would return to normal levels by the middle of the year.