OPEC will consider at its December meeting instituting even deeper production cuts, OPEC sources told Reuters today, even though not everyone in the group is complying with the existing production cuts.
The “everyone” refers to Iraq and Nigeria, which are notorious over producers compared to what has been assigned to them under the current production cut pact. Still, OPEC has managed to overcomply month after month, but Iraq and Nigeria have repeatedly failed to adhere to the agreement—a likely sore spot within the cartel as other members have done their fair share, or as in Saudi Arabia’s case, more than their fair share.
Other OPEC members, according to the source, and in particular Saudi Arabia, would be loath to implement even more cuts unless Iraq and Nigeria step up their compliance.
“In December we will consider whether we need more cuts for next year. But it is early now, things will be clearer in November,” the source told Reuters. November is when OPEC’s JTC committee is supposed to meet, and the committee will likely be looking closely at the two rogue members’ production, and will submit its findings and recommendations to OPEC to be debated at the full OPEC+ meeting that will be held on December 5 and 6.
The pressure on OPEC to act aggressively to keep oil prices from floundering is immense with even serious geopolitical Middle East turmoil failing to bolster oil prices for any significant length of time, combined with its own demand growth projections that have been lowered on a fairly regular basis.
Further lighting a fire under OPEC is growing oil production in the United States that has now reached 12.6 million bpd, up from 11.7 million bpd at the start of the year. But any move by OPEC to offset rising crude oil production in the United States also comes with the side effect of giving way of market share. Reuters