Challenge for Opec as output deal shows signs of unravelling

Jul 25, 2017, 11:43
Challenge for Opec as output deal shows signs of unravelling

Saudi Arabia, the world's top oil exporter, announced it would go further than cutting its production and would also limit its exports at 6.6 million barrels a day. Libya and Nigeria are already exempt from Opec cuts, and Ecuador very publicly broke ranks with the cartel last week and upped its production.

OPEC and some non - OPEC states, such as Russian Federation, have been trying to cut production 1.8 million bpd through the end of March 2018.

At a gathering of ministers from major crude-producing nations in St. Petersburg, Russia on Monday, Saudi Energy Minister Khalid al-Falih said his country would limit crude oil exports at 6.6 million barrels per day (bpd) in August, nearly 1 million bpd below levels a year ago.

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Prices fell below below $50 (44 euros) per barrel recently due to higher production in the United States, which was not part of the deal - and also some countries' lack of discipline in enforcing cuts, for example Nigeria.

Nigeria, the top African oil producer, and Libya, both OPEC members, had been exempt from the agreement up to now due to problems affecting their industries.

Three people with knowledge of the talks said Monday that OPEC and non-OPEC's joint ministerial committee will consider recommending that crude exports be monitored along with production figures, a proposal originally presented by Kuwait in January. The Kremlin offered mixed support for the agreement during negotiations past year after publicly stating in 2015 that coordinating with OPEC was an unsavory proposal. Brent, the global benchmark, rose 63 cents, or 1.31%, to $48.69 a barrel on ICE Futures Europe.

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Non-OPEC member Oman's oil minister Mohammed al Rumhy told reporters he saw no need for additional production cuts from OPEC and non-OPEC.

Oil prices made small gains early on Monday, buoyed by expectation that a meeting on production would address rising output in Nigeria and Libya. Prices had been firm after the deal in December and through March, trading in the mid-to-high US$50s per barrel, but then weakened and fell to a post-deal low below $45 late last month, since when they have been trading between that level and $50. The North American benchmark WTI is now trading at $45.8 per barrel and Brent at $2.3 per barrel premium to WTI. USA crude was up 0.9% to $46.19.

OPEC Secretary General Mohammad Barkindo said market rebalancing would accelerate as demand would pick up in the second half of the year.

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