London
Opec and its allies are keeping their word on record production cuts. In the first month of its latest agreement, the coalition delivered almost all of the output cutbacks pledged to reverse the biggest oil-market slump in history, early estimates from consultants show.
The 13-member Opec alliance implemented 89% of their agreed curbs, according to JBC Energy GmbH in Vienna. The entire Opec+ coalition – which spans a further 10 exporters such as Russia – has achieved 92% compliance, market intelligence firm Kpler SAS estimates.
The Organization of Petroleum Exporting Countries and its partners in April announced a record output cut of 9.7mn barrels a day – roughly 10% of global supplies – to offset the loss of demand during the coronavirus crisis.
The measures have helped fan a recovery in crude prices, which were trading near $35 a barrel in London on Friday after slumping below $16 a month ago.
The strong performance may have been aided by additional cuts made by the Saudis. Although JBC estimates that the kingdom pumped 8.5mn barrels a day this month, in line with its new target, Kpler said Riyadh cut output by 1.2mn a day more than required.
The production is poised to fall even further in June, when the kingdom as well as the UAE and Kuwait have promised deeper curbs to accelerate the rebalancing of the market.
Compliance with the agreement has been widespread, with countries that are typically laggards also rising to the challenge.
Iraq, which often disregards output quotas entirely, has cut just over half of the 1mn-barrel reduction promised, according to JBC. Kazakhstan, another exporter with a poor track record, reached its target level by the middle of May, government data compiled by Bloomberg show.
It’s possible the good behaviour was forced rather than voluntary, however, as a dearth of customers and storage space for spare supplies left many producers with no choice but to dial back output.
Opec+ will meet on June 9-10 to decide whether to maintain the 9.7mn -barrel reduction for the remainder of this year, or ease the restraints to about 8mn barrels, as agreed.—Bloomberg/Agencies
