Saudi Arabia together with other OPEC members and Russia have decided on deeper production cuts for the first quarter of next year as part of an attempt to prevent oversupply and support oil prices.
Following a meeting in Vienna last Friday, the 7th OPEC and non-OPEC Ministerial Meeting decided for an additional adjustment of 500 tb/d to the adjustment levels as agreed at the 175th Meeting of the OPEC Conference and 5th OPEC and non-OPEC Ministerial Meeting. These would lead to total adjustments of 1.7 mb/d.
In addition, several participating countries, mainly Saudi Arabia, will continue their additional voluntary contributions, leading to adjustments of more than 2.1 mb. This additional adjustment would be effective as of January 1, 2020, and is subject to full conformity by every country participating in the ‘Declaration of Cooperation’ (DoC).
The DoC was reached on December 10, 2016, between OPEC and non-OPEC producing countries.
Reuters reported on Friday that, of the 500,000 bpd additional cuts, OPEC would shoulder 372,000 bpd and non-OPEC producers an extra 131,000 bpd.
According to a Friday statement by OPEC, participants reaffirmed their continued focus on fundamentals for a stable and balanced oil market, in the interests of producers, consumers, and the global economy.
The meeting emphasized the vital support and commitment of all participating countries in the DoC to build on the success achieved thus far, through each individual country adhering to their voluntary production adjustments and in supporting the Charter of Cooperation between Oil Producing Countries.
In order to observe the fair, timely and equitable implementation of the agreement, the Joint Ministerial Monitoring Committee was requested to continue to monitor its implementation and report back to the meeting, supported by the Joint Technical Committee and the OPEC Secretariat.
The 18th Meeting of JMMC will be held during the first week of March 2020 in Vienna, Austria, with an OPEC and non-OPEC Ministerial Meeting on March 6, 2020. The meeting decided that an OPEC and non-OPEC Ministerial Meeting also will convene in Vienna, Austria, on June 10, 2020.
WoodMac: March commitment could reduce its supportive impact
Ann-Louise Hittle, Wood Mackenzie’s vice president Macro Oils, said: “The group is taking a highly proactive approach to managing the market and will not commit to restraint beyond March 2020, when both a joint ministerial meeting and an extraordinary meeting will be held in the first week of the month.
“Russia has gained approval for its request to remove condensate from its quota. It will make an additional cut of 70,000 b/d beyond its current agreed cut of 300,000 b/d.
“Russia’s energy minister Alexander Novak confirmed the country’s commitment to cooperate with OPEC to balance the market.
“The new Saudi Energy Minister, Prince Abdul Aziz, was adamant that all those in the agreement must adhere and not leave the burden on Saudi Arabia.”
She added: “The fact the agreement runs to March could reduce its supportive impact on the market. However, the proactive, short-term management of the market OPEC+ is signalling is supportive overall to the outlook for 2020 and should avoid a significant downturn in prices.
Offshore Energy Today Staff
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