• Oil in global economy series: OPEC December deal compliance review

    Source: FxWire Pro - Commentary / 19 Jan 2018 03:27:05   Eastern Standard Time

    In November 2016, when OPEC members agreed to cut production for the first time since the Great Recession, it was welcomed with great optimism and oil price jumped more than 20 percent, from $45 per barrel to as high as $55 per barrel (WTI). However, that optimism faded amid higher production from the United States and reports of impatience within the OPEC with lower oil price. Even a fresh agreement in May, between the OPEC and participating non-OPEC producers, failed to lift price.

    However, as OPEC continues with its targeted production agreement, the oil has slowly turned from bearish to bullish on Middle East tension and as the market nears rebalancing. The oil price has reached the highest level since May 2015. In this article, we review the compliance among OPEC members based on December monthly oil market report.

    WTI is currently trading at $63.2 per barrel and Brent at $5.5 per barrel premium to WTI.

     

    Target as per OPEC deal
     (million barrel per day)

    November production
     (million barrel per day)

     

    December production
     (million barrel per day)

    Algeria

    1.039

    1.013

     

    1.037

    Angola

    1.673

    1.581

     

    1.633

    Ecuador

    0.522

    0.533

     

    0.526

    Gabon

    0.193

    0.197

     

    0.197

    Iran

    3.797

    3.818

     

    3.829

    Iraq

    4.351

    4.396

     

    4.405

    Kuwait

    2.707

    2.703

     

    2.7

    Qatar

    0.618

    0.604

     

    0.594

    Saudi Arabia

    10.058

    9.996

     

    9.918

    UAE

    2.874

    2.883

     

    2.878

    Venezuela

    1.972

    1.834

     

    1.745

    total

    29.804

    29.558

     

    29.462

     

    • According to data from secondary resources, the OPEC remains more than compliant with the agreement on an average production basis.
    • It is important to note that overall production from OPEC including the exempted members like Nigeria, and Libya rose by 42,400 barrels per day In December compared to November and some members are yet to comply with the agreed level of output.
    • In December, Gabon, Ecuador, Iran, Iraq, and UAE are the five countries that were non-compliant with the production levels.
    • Venezuela saw a sharp drop in production, to the tune of 89,000 barrels per day.