OPEC+ ministers to focus on compliance, market outlook

The OPEC and non-OPEC monitoring committee plans to focus on the group's compliance with production targets when members gather tomorrow in Abu Dhabi. Officials say weak compliance by a number of countries, including Iraq and Nigeria, constitutes a major problem.

With the existing agreement slated to run until the first quarter of 2020, the meeting is scheduled to be relatively short — starting at 9:30am local time (5:30am GMT) and lasting some two hours, followed by a press conference. Discussions are expected to centre on compliance levels and the market outlook.

At the July ministerial conference, members said they planned to discuss alternative proposals to the five-year average inventory metric to assess the market's balance. But this exercise now has been postponed.

Suggestions the group would consider deeper production cuts was also mooted weeks ago, when prices for international benchmark Brent fell below the $60/bl threshold. But this issue is also off the agenda.

Russian energy minister Alexander Novak, co-chair of the Joint Ministerial Monitoring Committee (JMMC) with new Saudi energy minister Prince Abdulaziz bin Salman, also nixed the idea of deeper cuts while speaking with reporters on the sidelines of the World Energy Congress (WEC).

Oman's oil minister Mohammed bin Hamad al-Rumhy told Argus that "when the price started to drop to the high $50s, we started informally exchanging messages with each other on whether there is something urgently needed. And we even got to the point of whether we needed to have a meeting before the 12 September [JMMC] meeting.

"We said, ‘Let us wait for a few days to see what happens.' And of course, the developments in the kingdom [Saudi Arabia], the changes, which started nearly 10 days ago, actually slowed that discussion."

Prince Abdulaziz bin Salman was sworn in on 8 September as the kingdom's energy minister. The new minister signalled that there would be no change in Saudi oil policy, which helped buoy prices.

Opec secretary-general Mohammed Barkindo and other delegates pointed to Iraq and Nigeria's lack of compliance. The group's Joint Technical Committee met today to review compliance levels but said latest monthly production data would not be available until tomorrow.

Argus estimates that the 11 Opec members participating in the Opec+ output restraint deal collectively produced 230,000 b/d below their combined target. This brought their August compliance rate to 128pc, down from a 2019 high of 158pc in July.

Iraq told reporters during the WEC that the country would cut production by October as it strives to meet its commitments.

"There will be a reduction of at least 150,000 b/d, and I have also ordered a cut on the exports," Iraq's oil minister Thamer Ghadhban said. Iraq pledged to cap its production at 4.51mn b/d, but the country has consistently flouted its quota.