Abu Dhabi: Saudi Arabia energy minister Khalid Al Falih met his Iraqi counterpart on Wednesday to discuss ways to step up efforts to rebalance oil markets, with Iraq not fully complying to the production cut agreement reached between Opec and non-Opec members last year.
In a tweet, Al Falih said that he discussed with Iraq oil minister Jabar Al Luaibi the importance of unifying efforts of all countries towards stability of the oil market.
He did not specify what measures the oil producing countries would be taking to stabilise the market.
Compliance levels of Iraq, the second biggest producer within Opec group has been falling in the last few months with compliance levels reaching less than 30 per cent of promised cuts delivered in June.
It is expected to be similarly low for July when Opec releases its data on Thursday, analysts said.
“Saudi has always said the cuts had to be a team effort and those lagging in compliance would not be tolerated and must be addressed head-on.So Iraq’s role is key because continued low compliance threatens the whole deal,” said Spencer Welch, an Opec expert and Director of IHS Energy based in London.
He said the oil markets are already rebalanced, but the issue is that stocks are barely falling and the supply cutters aim to get global oil stocks down to 5-year average levels by end 2017 is unlikely to be achieved.
“In truth, the need for the supply cuts has gone on longer than most of the participants originally anticipated. This was supposed to be quick nudge to rebalance the market. The production increases from Nigeria, Libya and US mean that the need for the supply cuts is now almost permanent.”
Echoing similar views, Jameel Ahmad, vice president of Corporate Development and Market Research at FXTM said Iraq’s failure to fully comply to its production cut might encourage similar behaviour from others who committed to limit production output as well.
“All Oil producers have a role to play in stabilising the Oil market, and if Opec can show investors that they are indeed united in their efforts to combat the ongoing oversupply in the market, it should gradually have the desired impact in the valuation of Oil,” he told Gulf News by email.
At a meeting in Abu Dhabi this week, the UAE, Iraq, Kazakhstan and Malaysia have expressed their willingness to fully comply with the production cut agreement.
The Joint Opec-Non-Opec Technical Committee (JTC) meeting was called to further improve conformity levels with the production cut deal reached between Opec and non-Opec members last year to accelerate the rebalancing of the global oil markets.
Thirteen members of the Opec and 11 non-Opec members agreed to cut production by about 1.8 million barrels a day to prop up oil prices.
The initial agreement which came into effect from January 1 this year was for six months but was further extended till March next year. Libya and Nigeria are exempt from the deal.