OPEC+ still plans to taper oil output cuts to 5.8 million b/d after 2020: UAE minister
OPEC and its allies are still intending to taper their crude oil production cuts by almost 2 million b/d at the start of 2021, UAE energy minister Suhail al-Mazrouei said.
“That is the agreement we signed. It is very clear,” Mazrouei said at the Energy Intelligence Forum. “There have been no changes to the agreement that I am aware of.”
The 23-country OPEC+ alliance is in the midst of a 7.7 million b/d production cut accord that is scheduled to shrink to 5.8 million b/d from January 2021 through April 2022, in anticipation of improving demand as the world recovers from the coronavirus pandemic.
But with oil prices hovering in the low $40s/b in recent weeks and Libya, which is exempt from the cuts, rapidly restoring production after a ceasefire between warring factions, the market has been speculating whether OPEC+ will extend its current quotas -– or even tighten them.
Any changes would need to be approved unanimously by the entire bloc.
A key OPEC+ monitoring committee, co-chaired by Saudi Arabia and Russia, is scheduled to convene online Oct. 19, while the full coalition meets Nov. 30 to Dec. 1.
Delegates have told S&P Global Platts it was still too early to make any decisions on the cuts.
“There have been no serious discussions on any additional measures, as of now,” one said. “You can not jump the gun and make a decision just because prices drop for a week or so.”
Mazrouei said global oil demand has been rising, though he conceded: “Of course, we are not back to normal yet.”
A full rebound may not be possible until a COVID-19 vaccine is available and travel restrictions are rescinded, he said.
“We in OPEC+ have a plan,” Mazrouei said of the cut tapering. “We believe that this is the calculated volumes…for what it will take to balance the market.”
He added that when the quotas are relaxed, OPEC+ members should not immediately raise their output and flood the market, destabilizing its progress to recovery.
“We are hoping that countries will slowly increase their production,” he said. “We do not want to see a spike in one country that leads to other countries not behaving.”
Overall compliance with quotas has been strong so far. S&P Global Platts, one of six secondary sources used by the alliance to track production, estimated 99% compliance among the group for September.
But compensation cuts due from members that exceeded their quotas in previous months went largely unfulfilled, with several countries yet to submit their plans to the monitoring committee of how they plan to implement their extra cuts.
The UAE, which breached its cap in August, will make its extra cuts of 100,000 b/d below its 2.59 million b/d quota in October and 84,000 b/d below in November, according to its plan.
“We will compensate the remaining in October and November, as we committed,” Mazrouei said.
He said it was unlikely the OPEC+ alliance would extend the deadline beyond December for members to make their catch-up cuts.
As co-chairs of the monitoring committee, Saudi Arabia and Russia “are pushing everyone to comply” by the end of the year, Mazrouei said. “And then moving forward as we move the reductions towards the 5.8 [million b/d], hopefully the countries can manage under the [quotas].”