Financial Energy Review
by James Ikenna……………….
Predictions that OPEC+ member countries will this week agree on further production cuts were discarded yesterday as oil producing nations and countries met to review production policies amidst the dwindling fortunes of the global oil market.
During the meeting between OPEC and non-OPEC allies, known as OPEC+ emphasis was rather placed on the need to be flexible as oil prices continue to trade at depressed levels.
The JMMC [Joint Ministerial Monitoring Committee] of OPEC+ observed that the recovery has not been even across the world and an increase in COVID-19 cases has appeared in some countries.
According to a statement from OPEC under the current circumstances and environment, the JMMC eplaoned the need and importance of being pro-active and pre-emptive and recommended that participating countries should be willing to take further necessary measures when needed.
The energy alliance agreed in July to cut output by 7.7 million barrels per day from August through to December, in an effort to prop up oil prices by limiting supply. Iraq and others also pledged to pump below their quotas in September to offset overproduction earlier in the year.
“The JMMC reiterated the critical importance of adhering to full conformity and compensating overproduced volumes as soon as possible,” OPEC officials said.
OPEC kingpin Saudi Arabia and non-OPEC leader Russia, the two biggest producers in the alliance, have both pushed for full conformity in recent months.
Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman has previously used OPEC meetings to publicly press recalcitrant members to stick to the pledged output cuts.
“I do not believe we should expect any material change of course out of the OPEC meeting this week when they review market fundamentals, in part because compliance with previously agreed production cuts has been high. It might set the stage for action at future meetings, however” Tim Bray, senior portfolio manager at GuideStone Capital Managers had said.
“Saudi Arabia’s efforts to secure higher compliance delivered results in August, with Iraq even partially delivering the promised ‘catch-up’ cuts … and Nigeria moving closer to full compliance,” Richard Bronze, co-founder of Energy Aspects, said in a research note.
The United Arab Emirates, traditionally a loyal partner to OPEC kingpin Saudi Arabia, emerged as a major laggard in delivering oil output cuts last month, Reuters reported on Wednesday, citing OPEC+ data.
The country has since said it will reduce oil supply in the coming months to compensate for pumping above its agreed limit in August.
Output from Iraq and Nigeria, respectively, was expected to remain low in September, Bronze said, then rise from October. “While OPEC+ will track how fundamentals and prices respond, we do not sense an appetite for deeper cuts,” he added
