Chineme Okafor in Abuja with agency report
Member countries of the Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC producers yesterday reached their first deal since 2001 to jointly curtail oil output and ease a global glut after more than two years of low prices that overstretched many national budgets and spurred unrest in some countries.
A Reuters report on the development stated that with the deal finally signed after almost a year of arguing within the OPEC, as well as mistrust in the willingness of Russia, a non-OPEC member to play ball, the market’s focus will now switch to compliance with the agreement.
Last week, OPEC agreed to slash output by 1.2 million barrels per day from January 1, 2017, with top exporter Saudi Arabia cutting as much as 486,000 barrels per day (bpd).
While no official statement was released by the OPEC Secretariat in Vienna venue of the meeting as the time of filing this report, Nigeria’s Minister of State for Petroleum Resources, Dr. Ibe Kachikwu however confirmed the development on his twitter handle @EIK where he noted that the total volume to be cut by non-OPEC members would be 558,000 barrels per day (bd).
Kachikwu noted that within the deal, Azerbaijan will cut its daily production by 35,000bd, Bahrain – 10,000bd, Brunei Darussalam – 4,000bd, Equatorial Guinea – 12,000bd, Kazakhstan – 20,000bd, Malaysia – 20,000bd, Mexico – 100,000bd, Oman – 45,000bd, Russia – 300,000bd, Republic of Sudan – 4000bd, and Republic of South Sudan – 8000bd.
He said that amounted to 558,000bd of oil production cut from the non-OPEC member countries, with the Russian Federation taking the biggest cut of 300,000bd, followed by Mexico which has agreed to shelve 100,000bd of its production volume.
OPEC has a long history of cheating on output quotas. The fact that Nigeria and Libya were exempt from the deal due to production-denting civil strife will further pressure OPEC leader Saudi Arabia to shoulder the bulk of supply reductions.
Russia, according to Reuters had 15 years ago failed to deliver on promises to cut its oil production in tandem with OPEC, but was now expected to perform a real output reductions this time.
Reuters also stated that market analysts were beginning to question whether many other non-OPEC producers would be attempting to present a natural decline in output as their contribution to the deal.
It quoted OPEC’s Secretary-General, Mohammed Barkindo to have said before the agreement, that: “This is a very historic meeting … This will boost the global economy and will help some OECD countries to reach their inflation targets.”
Similarly, the President of the OPEC Conference and Qatar’s Minister of Energy and Industry, Mohammed Bin Saleh Al-Sada, said before the meeting that the decision of OPEC to cut its production by 1.2mbpd last week was a collaborative timely action to address the prevailing market realities and prospects, and that it expected non-OPEC members to complete the picture.
“It was a commitment to the global community to help restore and sustain market stability with positive and broad implications on the world economy, the oil industry and oil producing and exporting nations.
“The efforts made by OPEC member countries were extremely constructive. They have shown great resolve, flexibility, responsibility, as well as a sense of compromise. We hope that today’s meeting will complete the picture from the non-OPEC perspective.
“We should aspire to announce to the world a responsible and timely joint action to help rebalance the market and see sustainable market stability return. I can only re-emphasise the importance of this – for our countries, for the oil industry and for the global economy as a whole,” said Al-Sada.