OPEC+ gets tough with quota busters over massive COVID oil cuts

London — Saudi Arabia stepped up its campaign against OPEC+ quotas busters on June 18, giving producers who are failing to perform on their agreed output cuts just days to show how they will toe the line on oil production curbs.

Iraq and Kazakhstan have detailed to the OPEC+ alliance how they will implement deeper output curbs in the coming months to make good on their quota violations in May. But other members that went over their caps have yet to submit their plans, drawing the ire of Saudi energy minister Prince Abdulaziz bin Salman, who has made compliance a pet issue.

They will have until June 22 to do so, according to a committee tasked with monitoring the OPEC+ production cut accord. Delegates have previously identified Iraq, Kazakhstan, Nigeria and Angola as the biggest offenders.

"The committee stressed that the attainment of 100% conformity from all participating countries is not only fair and equitable, but vital for the ongoing and timely rebalancing efforts and helping deliver a sustainable oil market stability," the OPEC+ Joint Ministerial Monitoring Committee said after its June 18 online meeting.

Overall compliance with the cuts was 87% for May, the committee said.

OPEC and 10 allies are in the midst of a 9.7 million b/d production cut agreement aimed at speeding the oil market's recovery from the coronavirus pandemic. The cuts are set to run through July and then scale back to 7.7 million b/d through the rest of the year, with the JMMC meeting monthly to adjust the quotas as needed.

No decisions were made on August cut levels, delegates said, with the market outlook still uncertain.

Saudi Arabia, the UAE, Kuwait and Oman agreed to implement an additional voluntary 1.2 million b/d cut for June as a show of good faith but have said they do not plan to continue those in July.

"We are committed to a common goal -- balancing the global oil market," Russian energy minister Alexander Novak said in his opening remarks at the JMMC meeting ."Everyone understands that we are not yet close to reaching a sustainable recovery."

In an interview with the Rossiya 24 channel after the meeting, he said the market could rebalance "maybe by the end of this year or the middle of next year, to draw stocks to the 5-year average levels."

Heated meeting

The statement did not detail the exact schedule of cuts for Iraq and Kazakhstan. The deal calls for the compensatory cuts to be made over July-September. Ministers for both countries could not be reached for comment.

Iraq, frequently criticized by its OPEC+ counterparts for its unwillingness to comply, produced nearly 600,000 b/d over its allocation in May, according to Platts latest survey of OPEC output. Newly installed oil minister Ihsan Ismaael said June 15 that crude exports in June would be slashed some 780,000 b/d, or almost a quarter, in an effort to comply with the deal.

An Iraqi source told Platts on condition of anonymity that June and July production would be at the same levels, but did not provide any figures.

Kazakh energy minister Nurlan Nogayev had said June 9 that his country pumped 3.13 million barrels over its quota over May 1-12 and was committed to the terms of the deal.

Nigeria was 288,000 b/d in excess of its quota, while Angola was 90,000 b/d over, according to the Platts survey.

In all, nine out of the 23 OPEC+ members had compliance levels of below 90% for the month, based on Platts calculations.

The spotty performance and lack of plans for compensatory cuts caused the JMMC meeting to get heated at times, with Prince Abdulaziz scolding the feet-dragging members, sources involved in the talks said. Prince Abdulaziz is a co-chair of the JMMC with Novak.

"He did show some anger today,” one OPEC+ official said, asking not to be identified, due to the sensitivity of the discussions.

A post-meeting news conference was abruptly cancelled and rescheduled for sometime the week of June 22, after all underperforming members submit their compensation schedule for production cuts.

The next JMMC meeting is set for July 15, with a delegate-level technical meeting held the day before.