The 10 Organization of the Petroleum Exporting Countries (Opec) members obligated to reduce oil output under the landmark agreement signed late last year achieved 91 per cent of their required cuts in January, with their production falling 1.14 million barrels per day (bpd) from October levels, according to the latest survey of Opec and oil industry officials and analysts by S&P Global Platts.
Those cuts were, however, offset partly by output gains in Libya and Nigeria, which are exempt from the accord, and Iran, which is allowed to increase its production slightly.
“The market has taken early indications of compliance with the Opec/non-Opec production agreement bullishly, and, indeed, the cuts that Opec made in January look strong so far. But as we are just barely into the six-month deal, it’ll take a few more months of monitoring to know whether the discipline that Opec is displaying will hold” said Herman Wang, Opec specialist, S&P Global Platts in a statement.
In all, Opec’s 13 members -- not including Indonesia, which suspended its membership at the group’s last meeting -- produced 32.16 million bpd in January, a 690,000 bpd decline from December, the S&P Global Platts survey showed. With Indonesia, the organization’s January production totaled 32.89 million bpd. Under the agreement, Opec pledged to cut 1.2 million bpd from its October output levels for six months starting from January 1 and freeze production at around 32.5 million bpd, including Indonesia. Eleven non-Opec countries led by Russia have also agreed to cut output by 558,000 bpd in the first half of 2017.
The survey shows that several Opec countries covered by the agreement still need to make some progress in lowering output to their allocations, though the over compliance of Saudi Arabia, Kuwait and Angola helps compensate. Since the deal covers an average of January to June output, some month-to-month fluctuations are to be expected. Saudi Arabia has backed up the strong words of its energy minister Khalid al-Falih, who played a key role in negotiating the agreement, with its January production falling to 9.98 million bpd, according to the Platts survey.
That is below its allocation of 10.06 million bpd under the deal, as crude exports declined by more than 500,000 bpd in the month, S&P Global Platts shipping tracker cFlow showed. It is also the first month Saudi production has been below 10 million bpd since February 2015, according to the survey archives. Falih in recent weeks had said that the kingdom would “strictly adhere to our commitment” and signaled that it would make deeper cuts in February.