Is OPEC going into extinction?
Speculation about whether or not the Organization of the Petroleum Exporting Countries (OPEC) will extend its production cut deal for another six months shows that the oil cartel may be losing grip of the global crude oil market.
The oil cartel had struggled unsuccessfully for several months to reach a consensus on how to reduce production in a bid to stabilise prices.
OPEC agreed in late November to cut its production by 1.2 million barrels a day, the first reduction agreed to by the cartel since 2008. Eleven other non-OPEC oil-producing countries pledged in December to cut an additional 558,000 barrels a day, reaching an overall reduction of 1.8 million barrels per day.
Iran resisted the resolution considering it recently returned to the group after serving years of US imposed sanctions. The resolution also took into consideration Nigeria’s peculiar crisis situation wrought by incessant attacks by Niger Delta militants on oil and gas production facilities in the region resulted in a massive cut in the country’s oil production capacity by almost 50 per cent. Libya was exempted for a similar reason, following series of attacks on its oil facilities by terrorists in recent months.
Oil fell further towards $50 a barrel pressured by uncertainty over whether an OPEC-led production cut will be extended beyond June in an effort to counter a glut of crude. International benchmark Brent crude was down 26 cents at $50.54 after falling as low as $50.26 while US crude was down 37 cents at $47.60.
OPEC, non-OPEC assess progress
The joint committee of OPEC and non-OPEC oil producers met in Kuwait to gauge the health of the oil market and figure out next steps even though they won’t make any decisions until May.
The joint committee said that as of February, OPEC and participating non-OPEC countries achieved a conformity level of 94 percent on a voluntary six-month cut in output. The statement said the figure “demonstrates the willingness of all participating countries to continue their cooperation.”
The committee said it “encouraged all participating countries to press on toward 100 percent conformity.”
The statement said that while the deal came into effect at the start of the year, it can be extended for another six months, “depending on the status of supply and demand, including global inventories.”
Iran, Nigeria may join output cut
Nigeria, Iran and Libya were exempted from the Organization of Petroleum Exporting Countries (OPEC) crude oil output aimed at stabilising prices.
Saudi Arabia may demand that Iran, which is allowed a slight rise in output under the deal, commit to an output reduction as a condition of continuing the cuts, people familiar with the kingdom’s thinking said.
The provision is among several that Saudi Arabia, tired of seeing its market share eroded as it bears most of the burden of OPEC’s agreed cuts, is likely to come to the table with, sources say. These include stipulations on members who have exceeded their quotas and exempt members nearing full production capacity, notably Nigeria.
But it is Iran that is likely to be the biggest sticking point given historic distrust between the two countries, as talks among OPEC members ramp up amid signs that the global inventory glut remains stubbornly high.
Angola trims May crude exports
Angola’s state-run Sonangol has taken two cargoes out of its planned May exports in a move to boost its compliance with an OPEC deal to curb production, an oil trader familiar with Angolan loading plans said. A revised loading programme showed the country’s exports were now set at 1.61 million barrels per day (bpd) from 52 cargoes, down from 1.67 million bpd from 54 cargoes initially.
The two cargo loadings removed and pushed into June were an end-month Dalia that was with Sonangol and a Cabinda that was set to load with ENI. Under the deal with the OPEC and other nations, Angola agreed to cut 78,000 bpd from a reference production level of 1.751 million bpd.
So far this year, Angola’s production and exports have been well below the target but several fields are coming into production or ramping up, including Chevron’s Mafumeira Sul and Eni’s West Hub and East Hub projects.
FRANK UZUEGBUNAM