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An agreement to deepen oil production cuts by 500,000 bpd has put OPEC members at odds with each other as they try to hammer out the individual production quotas.
The additional cuts were announced yesterday, after a meeting of the monitoring committee that supervises the cuts. Yet at the time they were only a recommendation, and details had yet to be clarified. According to sources from the cartel who spoke to S&P Global Platts, the OPEC meeting that followed featured vocal disagreements and the walkout of the Angolan delegation at one point during the deliberations.
On Thursday, the much-anticipated meeting in Vienna began with rumors among analysts that a so-called “Saudi surprise”—deepening the cuts by 800,000 bpd or even more—may be in the making. The unusual level of ‘no comments’ from delegates and unusually cohesive discipline in (the lack of) messages to the media raises questions, Financial Times Energy Editor, David Sheppard, tweeted. Related: Six Oil Stocks To Survive The Shale Bust
Yet after the monitoring committee meeting, Russia’s Energy Minister Alexander Novak said the committee had agreed to recommend further cuts of half a million barrels daily, to be distributed unevenly between OPEC and Russia and the other non-members. OPEC members were to shoulder the bulk, at 395,000 bpd, while Russia and the rest of the non-members would take on an additional 105,000 bpd in cuts.
Several celebratory post-meeting events that had been in the books for Thursday evening were cancelled, including a dinner and a cruise.
The reaction of traders was understandable: the number of forecasts warning of an oil glut is rising as the year draws to its end, and expectations for the production cuts are more demanding than they would have been otherwise. Meanwhile, some OPEC members and, more notably, Russia, have been consistently exceeding their earlier quotas, suggesting that even deeper cuts will not make much of a difference in actual production. Finally, Saudi Arabia is already cutting 400,000 bpd more than it had agreed to last December.
By Irina Slav for Oilprice.com
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