Dubai — Deciding the OPEC+ oil production cuts on a monthly basis during the oil price and COVID-19 crises undermines market stability, Oman's oil minister Mohammed Al-Rumhy has told S&P Global Platts.
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"It's very difficult to plan and the market dynamics of a month-to-month adjustment of production doesn't really work," said Rumhy. "I hope that we can come up with a better agreement on how we manage both the supply-demand picture as well as the stock threat to the fundamentals."
As things currently stand, the group will likely next meet in early July to discuss the state of the market, and if demand has not picked up then cuts at current levels will likely be extended to the end of August, Rumhy said.
Meanwhile, there will also be a meeting of the Joint Ministerial Monitoring Committee (JMMC) in the next week or so to review production levels for May, the minister said.
"Is Oman willing to continue the cuts? I am in favor of extending everything until the December 31. The level of inventory is still threatening the fundamentals." said Rumhy. "But there are some other countries, Russia for example, that have issues. Especially a long-term extension, and they have their own circumstances that are different from ours."
The 23-member OPEC+ group of producers most recently met on June 6, agreeing to roll the current production cut over to the end of July. Initially agreed in April, OPEC+ deal calls for cuts of 23% -- 9.7 million b/d -- from baseline production levels in October 2018, except for Saudi Arabia and Russia, who were given identical baselines of 11 million b/d.
Under the agreed-upon cut, Oman will cut its May through July crude production by 23%, or 201,000 b/d, to 680,000 b/d. A member of OPEC+, Oman is the Persian Gulf's largest oil producer that is not a member of OPEC, with a maximum production capacity of about 1 million b/d.
A major point of contention for Russia is the lack of compliance from OPEC members Iraq and Nigeria. Russian energy minister Alexander Novak had teamed up with Saudi counterpart Prince Abdulaziz bin Salman in the weeks leading up to the June 6 meeting to pressure non-compliant members to commit to extra cuts.
"People who comply normally don't like people who don't comply, even if they used to be one of those," said Rumhy. "Normally, when it comes to compliance, we tend to have kind of a short memory when we evaluate."
Iraq, whose history of quota flouting has long been a sore point among the coalition, pumped 4.19 million b/d in May, nearly 600,000 b/d above its cap, making it the worst offender by far, the Platts OPEC survey found.
Nigeria, also frequently out of compliance, produced nearly 300,000 b/d in excess of its quota, while Angola was 90,000 b/d above its target and Kazakhstan was 161,000 b/d over, according to the survey.
"Compliance has long been an issue for OPEC and OPEC+," said Rumhy. "I hope there is a clear understanding that we need to comply to be fair to each other. Hopefully that's behind us, because the countries that were mentioned in the meeting, both of them came up with a very positive statement on willingness to comply. They said they are going to comply, so I have no reason to doubt them."