Kuwait- Saudi Energy Minister Khalid al-Falih seems to be frustrated with the current situation in the oil market, according to his latest statement in the Joint OPEC-Non-OPEC Ministerial Monitoring Committee meeting in St Petersburg.
Falih has the right to be dismayed because some countries are only partially complying with the oil output cut agreement while others are complying with more than the required percentage, such as Saudi Arabia.
Further, prices remain under USD50 since the last ministerial meeting of OPEC in May, despite exerted efforts to reduce production.
Falih said that Saudi Arabia announced it would go further than cutting its production and would also limit its exports at 6.6 million barrels a day in August compared to 6.54 million barrels in March. This announcement boosted prices that rose above USD50 in Tuesday’s session.
Iraq’s Weak Compliance
Iraq’s compliance with the oil output cut is still weak, reaching 30 percent in June as revealed by secondary sources adopted by OPEC although official figures announced by Iraq show a percentage exceeding 90 percent.
Falih has exerted tremendous efforts with Iraq, traveling in May for the purpose of persuading officials of the importance of extending the agreement to next March after it ended in December.
But Baghdad doesn’t seem to interact with any attempt to reduce oil output because it is planning to increase production energy to 5 million barrels per day by the end of 2017. For this, Iraq is among first countries that don’t wish that the agreement be extended after March, similar to Kazakhstan.
Libya and Nigeria
Falih faces challenges not only with weak-complying countries but also with states exempted from the reduction agreement: Libya and Nigeria. He stated that OPEC supports restoring production in Libya and Nigeria but at the same time the Ministerial Monitoring Committee should follow up effects of increasing production on the market.
Nigeria has agreed to limit its production to 1.8 million barrels a day – Libya has a target of 1.25 million barrels a day and has announced that it won’t join the agreement until reaching it.
Russia shows more frustration than Saudi Arabia when it comes to weak compliance of countries. Russian Energy Minister Alexander Novak told reporters that an additional 200,000 bpd could be removed from the market if compliance with a global deal to cut output was 100 percent.
In conclusion, the committee agreed upon a sole recommendation. Kuwait, chairing the committee, stated that OPEC might call for an extraordinary meeting to add Nigeria to the agreement and might extend it after March if markets failed to re-balance.