The Organisation of Petroleum Exporting Countries and its allies meet in Vienna this week to decide whether to relax oil-output caps, potentially setting up one of the most contentious meetings in recent history.
The group’s production cuts have been a success. The global oil glut is gone, with commercial crude stocks in industrialised countries falling to a three-year low in April, according to the International Energy Agency. However, the agency is also warning that prices have risen so quickly they could have negative consequences, such as a slowdown in demand growth.
After a meeting in Moscow last week, Saudi Arabia’s Energy Minister Khalid al-Falih said a rise in output from the group is “inevitable.” His Russian counterpart Alexander Novak said the boost could be as large as 1.5mn bpd.
Their proposal faces internal opposition from Iraq, Iran and Venezuela, all of which stand to lose out if prices fall. There’s also external pressure, notably the wrath of US President Trump, who took to Twitter again last week to criticise Opec for raising crude prices too high.
A supply increase may be needed to offset declines elsewhere in Opec. Combined output from Iran and Venezuela could slump by as much as 30% by next year, according to the IEA.
Following are the latest positions of most of Opec, plus non-members Russia and Kazakhstan. The respective shares of supply are based on May output. Estimates for the price each member needs to balance its 2018 budget are from the International Monetary Fund, unless otherwise specified. The compliance rate with each nation’s pledged production cut is for May, according to the IEA.
Price needed: $105.70; Compliance: 98%; Share of Opec production: 3.3%
Algeria relies almost entirely on oil and gas revenue for hard currency. After struggling to narrow a budget deficit that had ballooned to over 15% of GDP during the oil slump, it started spending again as crude prices rose. The North African nation was one of the key architects of the production-cuts deal, investing a lot of diplomatic effort bringing together Russia and the other producers in 2016.
Price needed: $78 (RBC); compliance: 283%; share of Opec production: 4.8%
With a debt equivalent to about 70% of GDP, according to the IMF, oil prices hovering around $80 a barrel have been good news for Angola. Not so good is the country’s production, which has fallen well below its target as ageing fields decline. Angola is among several nations that could struggle to boost output if quotas are eased, giving it less incentive to support the proposal from Saudi Arabia and Russia.
Price needed: $68.10; compliance: n/a; share of Opec production: 12%
No country illustrates the divide within the group more than Iran – the most vocal opponent of the proposal to boost output. “The Trump administration is trying to intervene in the affairs of a sovereign organisation” and they shouldn’t bow to his pressure, Iran’s Opec governor Hossein Kazempour Ardebili said in an interview last week. The country insists that renewed US sanctions on its oil industry will leave its exports unaffected, but initial tanker-tracking data tells a different story. Allowing other Opec members to boost output could leave Iran’s market share in Asia and Europe vulnerable.
Price needed: $54; compliance: 43%; share of Opec production: 14%
Opec’s second-biggest oil producer also said publicly that the group should resist pressure to increase output, saying the supply deal hasn’t yet achieved its purpose and Brent crude is still below the desired level. Iraq’s robust defence of the accord is undermined by its own implementation of production cuts, is the worst in the group of 24 nations after Kazakhstan.
Price needed: $60.60; compliance: -1,012%
Central Asia’s biggest oil producer has consistently breached its output target throughout the agreement. In May, Kazakhstan pumped more than 2mn bpd for the first time, an increase of 200,000 bpd from the agreement’s reference level as the giant Kashagan oil field continued to ramp up, according to IEA data. “I believe the Opec+ deal may be reconsidered toward softening,” Kazakh Energy Minister Kanat Bozumbayev said in a June 5 interview.
Price needed: $48; compliance: 98%; share of Opec production: 8.5%
Kuwait has typically followed Saudi Arabia’s lead on Opec policy. The nation has fulfilled its pledge to cut oil output by 130,000 bpd, while also upgrading export facilities to launch a new super-light crude by the end of June. This gives Kuwait the opportunity to pump an additional 220,000 bpd if Opec’s production limits are removed, according to the IEA.
Price needed: $132.80; compliance: n/a; share of Opec production: 3.1%
The North African nation was exempt from cuts in the 2016 deal because its oil industry was recovering from a civil war. That allowed Libya to make substantial output gains last year as the National Oil Co restored export infrastructure, stabilising production near 1mn bpd. Supply was disrupted again this month as fighting erupted near two major oil ports, raising more questions about its ability to boost output.
Price needed: $124 (RBC); compliance: n/a; share of Opec production: 4.6%
Also exempt from production cuts, Nigeria has struggled to maintain steady output due to militant attacks and leaks from oil pipelines. In May, the country’s oil output fell by 54,000 bpd to 1.7mn, the biggest drop among Opec members, according to data compiled by the group’s Vienna Secretariat.
Price needed: $40 (Energy Ministry’s budget rule); compliance: 83%
Russia is the largest non-member to join Opec’s production cuts and, alongside Saudi Arabia, has been the driving force behind the deal. Now, it’s a key proponent of lifting output restrictions after President Vladimir Putin indicated he would be happy with an oil price closer to $60. Russia has reduced output by 250,000 bpd and state-run companies including Rosneft and Gazprom Neft are keen to start new fields that could add another 155,000 next year, according to the IEA.
Price needed: $87.9; compliance: 108%; share of Opec production: 32%
Saudi Arabia made a remarkable policy U-turn in the past two months. At a meeting in Jeddah in late April, al-Falih signalled a desire for higher prices and prolonged cuts. Then Trump started attacking Opec on Twitter and reimposed sanctions on Iran’s oil exports. A month later, the Saudi minister was proposing an output boost to ease consumer anxiety about high prices. This opens al-Falih to Iranian accusations that he is doing the bidding of the US, but the kingdom seems to determined to proceed and its output already crept up by 100,000 bpd in May.
Price needed: $223 (RBC); compliance: 744%; share of Opec production: 4.3%
Venezuela has made the deepest cuts, but not through choice. Its crude production continues to plummet as it grapples with an economic crisis, an exodus of staff at state-run oil firm PDVSA and civil unrest. The IEA predicts the Latin American country will lose 1.1mn bpd of production from 2018 to 2019, with the slide accelerating this month as more facilities shut down. Venezuela is opposed to Opec increasing production.
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