Opec is urging oil suppliers outside the group to fulfil their commitments to cut output, and crude prices will rise once producers demonstrate better compliance with their agreement to clear a global glut, Kuwait’s oil minister said.
The Organisation of Petroleum Exporting Countries, which agreed to the cuts with 11 other oil-producing nations in December, is 92% compliant with its pledge to reduce output by 1.2mn bpd, Oil Minister Essam al-Marzooq told reporters on Monday in Kuwait City. Non-Opec producers are complying at a lower rate of more than 50%, he said.
“At the time when producers signed the deal, the initial commitments were to gradually increase cuts until April and May, so we were expecting to see some producers not fulfilling the 100% cuts,” al-Marzooq said. “We understand the circumstances, and in February we are talking to non-Opec producers to raise their cuts according to their commitments.”
Opec, faced with lower crude prices, agreed in November to reverse its strategy of pumping without limits to defend its share of the market against increased supplies, including oil from US shale deposits. The group secured commitments from other producing states to pare their output by 558,000 bpd starting in January. Benchmark Brent crude, which traded at more than $115 a barrel in June 2014, has stemmed losses since the deal took effect.
“Prices are good now and we expect them to increase with the rise in the compliance rate,” al-Marzooq said.
The UAE, also a member of Opec, will meet its pledged level of cuts as an average over six months, the country’s energy minister, Suhail al-Mazrouei, said in Dubai. The UAE expects to make deeper reductions when oilfield maintenance work starts in Abu Dhabi in late March or April, he said, without quantifying the nation’s current compliance with its pledged cuts. The International Energy Agency reported on February 10 that Opec achieved the best compliance rate in its history at the outset of the accord. Opec fulfilled 90% of promised output cuts in January, as key member Saudi Arabia pared production by even more than it had committed, the Paris-based agency said.
Russia and the other non-Opec participants in the agreement cut 269,000 bpd of their pledged reduction of 558,000 barrels, preliminary data from the IEA showed. This equates to a compliance rate for non-Opec producers of about 48%, according to Bloomberg calculations.
Flames emerge from flare stacks at the oil fields in Basra, Iraq on January 17. The International Energy Agency reported last Friday that Opec achieved the best compliance rate in its history at the outset of the accord.
