Abu Dhabi — Saudi Arabia's new energy minister Prince Abdulaziz bin Salman on Thursday prevailed on two of the coalition's most recalcitrant members -- Iraq and Nigeria -- to bring their oil production down closer to their quotas, in what delegates said would amount to a 400,000 b/d output cut to help shore up slumping prices.
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But with the market expecting deeper cuts to avoid what many analysts forecast will be a severe oil glut next year, prices fell in the wake of the Joint Ministerial Monitoring Committee meeting in Abu Dhabi. Front-month ICE Brent futures were trading at $59.76/b at 1344 GMT, down 1.73% from the previous close. Ministers said they would defer any changes to their current 1.2 million b/d supply accord until the full coalition meets December 5-6 in Vienna.
"One thing I can report is that there is a clear-cut readiness to be responsible and responsive," Abdulaziz said in a press briefing after making his debut as co-chair of the JMMC, declaring that Saudi crude production would average 9.89 million b/d in October and remain at that level for the rest of the year, far below its quota as it leads the coalition's efforts to rebalance the market.
That is actually a rise from the kingdom's August output of 9.79 million b/d.
A Gulf delegate told S&P Global Platts that the members fully compliant with their quotas were tiring of the less cooperative countries.
"This is why it was useless to discuss further cuts, because it will mean a free ride," the delegate said.
Publicly, at least, ministers said they talked in detail about the US-China trade spat, rising shale oil production, prospects for a global recession, and the possibility of sanctions relief for Iran -- and decided that none of those matter for the moment. Output quotas would remain at the same levels and there was no need to implement deeper cuts now.
"All of these things were discussed," the prince said. "The one thing I am sure of is that what we hear collectively is that we are ready to attend to any of these situations. The sense of responsibility is there. These things, if they are to occur, obviously we will have to have a meaningful way of addressing them."
Russian energy minister Alexander Novak, the other JMMC co-chair, said he was deeply worried about the possibility of a global recession, given the many anemic economic growth forecasts.
"But as of today we will continue to monitor to see how these factors will affect the market," he said.
"I reiterate our commitment to the voluntary levels we committed to in December," Novak said.
In the meantime, Abdulaziz said the improved quota compliance by Iraq and Nigeria, plus continued adherence by the rest of the coalition to their committed cuts, would tighten a market already seeing draws of oil inventories.
Iraq, which overproduced its quota by 270,000 b/d in August according to OPEC's own figures, pledged to lower its output by 175,000 b/d in September and reach full compliance by October, its oil minister Thamir Ghadhban said after the meeting.
"I have already actioned cuts in production and exports level as of today," Ghadhban said. "September will be significantly lower than those that were exhibited in August. Deeper cuts will also be introduced as of October 1 in order to reach full conformity."
Nigeria, which is above its quota by 56,000 b/d, according to its new oil minister Timipre Sylva, would halve its noncompliance this month and eliminate it completely in October.
"And then maybe we might join the club with even more [cuts] for us later," he said.
UAE energy minister Suhail al-Mazrouei said his country, which was producing right at its quota, would reduce its output by an unspecified amount this month and next.
Those combined efforts would actually enable Saudi Arabia, which has borne the brunt of OPEC's cuts, to ease its overcompliance and raise its production slightly.
According to Platts calculations, OPEC's 10 members with quotas besides Saudi Arabia were a collective 160,000 b/d above their allocations, while Saudi Arabia was 520,000 b/d below, in August.
"'Full compliance' was the mantra of this JMMC meeting as an important component of maintaining the agreement," said Sara Vakhshouri, who heads the energy consultancy SVB Energy and attended the proceedings.
Abdulaziz said that under his leadership, the coalition would seek greater participation from all members. Many countries had become resentful that his predecessor, Khalid al-Falih, was ignoring their views in favor of strengthening a bilateral alliance with Russia.
The prince promised to be a good listener.
"Myself and my colleague, minister Novak, have awakened up to a new reality, which is that we are not being too inclusive," he said. "And we should also never ever belittle the little contribution from wherever it may come from any contributing country. Because it is all about the aggregation of these numbers."
Fellow ministers praised the prince, who has been part of Saudi Arabia's OPEC delegation for decades and is known for his humor and negotiating acumen. The coming months will tell whether the promises he extracted are backed by action and reward the coalition with higher oil prices.
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