Opec+ JMMC says oil market still unstable: Update

Adds detail following JMMC meeting

The Opec+ alliance is showing no sign of veering away from its plan to taper production cuts from January, although it expects "precarious market conditions" in the months ahead.

The group's Joint Ministerial Monitoring Committee (JMMC), which monitors compliance with output quotas, today made no recommendation for Opec+ to amend its plan to ease crude production cuts by almost 2mn b/d at the start of next year, instead urging members to be "vigilant and proactive" given market volatility.

Uncertainties are mounting about the oil market's ability to absorb the extra supply come January, as tightening Covid-19 restrictions hamper demand recovery and as Libya ramps up its crude output. The country's production has reached 525,000 b/d, according to a Libya source, compared with an average 180,000 b/d in January-September, Argus data show.

The oil market is more unstable than it appears, Russian energy minister Alexander Novak said ahead of today's meeting.

"We are seeing how difficult it is for the market to continue on its recovery path. We are seeing a lot of uncertainty, which is preventing us from coming back to pre-crisis… demand levels," he said.

Saudi oil minister Prince Abdulaziz bin Salman said it was important to remain flexible in the current market.

"These are fast-moving times, and… we have to be able to take measures to head off negative trends and developments... before they become threatening," he said, adding that there is "still some work to do" for countries to compensate for previously exceeding their production quotas.

The group has pegged its September compliance at a three-month high of 102pc, but this falls to 97pc if the required compensatory cuts are included, according to an Opec+ document seen by Argus.

Members that overproduced must account for surplus output — including that not compensated for in September — by the end of the year, Prince Abdulaziz said. They have until 26 October to submit their compensation plans to the Opec secretariat.

"We have been promised by participating countries they would increase their efforts to compensate in October and that during the months of November and December for them to fulfil all their commitments, including the volumes not compensated in September, and to close this chapter once and for all," he said.

There is still a cumulative excess of 2.3mn b/d to clear by the end of the year, according to the Opec+ document. This is accrued by adding the individual monthly volumes by which non-compliers surpassed their respective quotas in the May-September period. Among Opec countries Iraq has the largest debt to clear, followed by Nigeria and Gabon. Russia has the biggest debt to clear among non-Opec countries, followed by South Sudan.

Prince Abdulaziz echoed his warning made ahead of last month's JMMC that oil speculators will be hurt.

"It would be unwise indeed if anybody wants to gamble on our determination," he said. "Destabilising speculation and manipulation have no place in a responsible and efficient market."

Prince Abdulaziz highlighted telephone calls between Saudi Arabia's crown prince Mohammad bin Salman and Russian President Vladimir Putin on 13 and 17 October to discuss the Opec+ agreements as a demonstration of the group's commitment to market stabilisation.

"It should be reassuring for the market that we are attending to it with every bit of seriousness and attentiveness… it is a period that needs hands-on attendance," he said.

The Opec+ Joint Technical Committee (JTC), which studies market conditions, next meets on 16 November, and the JMMC on 17 November. Opec and Opec+ will meet on 30 November-1 December, where policy decisions will be made.

By Rowena Edwards, Nader Itayim and Ruxandra Iordache