Register with us today

and in less than 60 seconds continue your access to:Latest news headlinesAnalytical topics and featuresCommodities videos, podcast & blogsSample market prices & dataSpecial reportsSubscriber notes & daily commodity email alerts

Already have an account?

Log in to register

Forgot Password

Please Note: Platts Market Center subscribers can only reset passwords via the Platts Market Center

Enter your Email ID below and we will send you an email with your password.


  • Email Address* Please enter email address.

If you are a premium subscriber, we are unable to send you your password for security reasons. Please contact the Client Services team.

If you are a Platts Market Center subscriber, to reset your password go to the Platts Market Center to reset your password.

In this list
Oil

OPEC+ tightens the screws on quota busters, delaying deal on oil cut extension

Commodities | Energy | Oil | Refined Products | Gasoline | Coronavirus

Shifting dynamics in store for Mediterranean LPG

Oil

Platts Market Data – Oil

Commodities | Agriculture | Biofuels | Oil

Geneva Biofuels Conference

Oil | Crude Oil

IRAQ DATA: June crude exports tumble, show progress on OPEC+ compliance

OPEC+ tightens the screws on quota busters, delaying deal on oil cut extension

Highlights

Saudi Arabia, Russia aligned on keeping cuts

Overproducing members pressured to make good

Deal hinges on commitments to comply

London — Talks between OPEC and its allies have bogged down over quota compliance, holding up an apparent deal to extend the coalition's landmark 9.7 million b/d production cut agreement beyond June for a month to juice the oil market's recovery from the coronavirus pandemic.

Not registered?

Receive daily email alerts, subscriber notes & personalize your experience.

Register Now

OPEC kingpin Saudi Arabia is insisting on firm commitments from other members to stick to their production quotas, and those who have violated their caps are being pressured to overcomply in the coming months to make up for their excess barrels, multiple sources involved in the discussions told S&P Global Platts.

With oil prices having crashed due to the pandemic and still far below what many members need to balance their budgets despite a rebound in recent weeks, tolerance for non-compliance appears in short supply. Ministers had been considering holding a meeting to finalize the cut extension on June 4, but those plans are on hold.

INFOGRAPHIC: OPEC+ faces tough choices in oil market recovery

Saudi energy minister Prince Abdulaziz bin Salman, in particular, has been a stickler for compliance, not above naming and shaming transgressors at previous OPEC+ meetings.

"For the countries that have not complied, they will be asked to compensate for the oversupply," one OPEC+ source said, asking not to be named due to the sensitivity of the negotiations.

The tough stance puts an uncomfortable spotlight on Iraq and Nigeria, who have been habitual laggards in compliance and whose May production figures appear to be far above their caps.

Iraq on June 2 reported its crude exports in May nearly matched its production quota, with interim oil minister Ali Allawi citing "technical difficulties" in bringing output down, while Nigeria revealed it pumped some 200,000 b/d above its cap for a lackluster 52% compliance rate.

"The other producers are simply not prepared to accept that Iraq and Nigeria continue free riding while others sacrifice market share and revenues," said Ole Hansen, head of commodity strategy for Saxo Bank.

Full compliance data will not come until mid-June, when all six secondary sources used by OPEC to monitor output, including Platts, report their May production figures.

HOW TO TACKLE THE GLUT

The OPEC+ alliance had floated moving forward the meeting to June 4 from its previously scheduled June 9-10, but no announcement has been made as discussions continue.

Without an extension, the 9.7 million b/d in cuts -- the largest coordinated supply accord in the market's history -- are set to roll back to 7.7 million b/d starting July 1 through the end of 2020. But the uncertainty of the global economic outlook has brought members into agreement that maintaining the deeper cuts is prudent, sources said.

After initially debating the length of an extension, Saudi Arabia and Russia, the key non-OPEC partner in the deal, have reached a tentative agreement on a one-month extension for now. OPEC+ ministers would meet on a monthly basis to review compliance, the sources said.

"A one-month extension is better than going to 7.7" million b/d, one delegate said.

Saudi Arabia and its Persian Gulf allies the UAE and Kuwait have pledged additional cuts totaling 1.2 million b/d below their quotas for June, though they have made no commitments beyond that, and sources said no decisions had been made for July.

OPEC's delegate-level Economic Commission Board held its regularly scheduled meeting June 3 to assess market conditions.

Many countries have begun loosening their lockdown measures and economic activity has picked up, but health experts have warned a second wave of infections could be coming.

The OPEC+ alliance is also dealing with a vast glut of crude in storage caused by the pandemic -- but also their bruising oil market share war in April, when no production quotas were in force after talks collapsed in March.

S&P Global Platts Analytics estimates that global crude stocks have risen some 450 million barrels since the start of the year, a volume that could take months to draw down, assuming demand rebounds and OPEC+ discipline remains strong.