Opec+ pushes back compensation deadline

Opec+ members that have exceeded their crude production quotas in recent months will have until the end of the year to compensate, rather than have to conform by the end of September, Saudi oil minister Prince Abdulaziz bin Salman said today.

Before moving the compensation deadline, the Opec+ group faced the inconceivable task of having to cut its collective output by more than 2.3mn b/d below its target this month to meet its pledge that members will fully compensate, by the end of September.

This was one of the conclusions to have come out of yesterday's meeting of the Opec+ Joint Technical Committee (JTC), according to its final report seen by Argus. The group's Joint Ministerial Monitoring Committee (JMMC), which monitors compliance, is currently meeting.

"The compensation mechanism was not established to substitute for full compliance or to encourage non-compliance," Prince Abdulaziz said in his opening remarks, adding that full compliance and compensation should become normal practice. "We must strive to put the compensation scheme behind us and implement it before year end," he said.

Of the 2.375mn b/d 'overproduced' in May-August, 1.64mn b/d was from Opec countries and 734,000 b/d was from non-Opec. The JTC yesterday said that only six Opec+ members — Algeria, Kuwait, Saudi Arabia, Bahrain, Malaysia and Oman — did not exceed their quotas in that period. The UAE, a staunch ally of Saudi Arabia in Opec policy, also surpassed its production ceiling last month.

Among Opec countries, Iraq has the largest debts to clear, and said earlier this month that it would ask today's JMMC for an extension to its compensation deadline to the end of November. This was after its oil minister Ihsan Ismael repeatedly pledged to comply fully with the compensation cuts in August and September.

"Using tactics to over produce and hide non-compliance have been tried many times in the past, and always end in failure," Prince Abdulaziz said today. "Repeated promises that are not carried through in a timely fashion may have temporary positive impact, but if these are not delivered, they can come back to bite us all."

By Rowena Edwards, Nader Itayim and Ruxandra Iordache