Non-OPEC oil producers are failing to meet their supply cut targets
Non-OPEC oil producers are failing to meet their supply cut targets: The 1.2 mbd oil production cut agreement made between OPEC and non-OPEC countries last year is falling by the wayside as new Bloomberg data reveals that just 10 of the 21 signatories met their production targets in January. OPEC more or less upheld their end of the bargain, making 86% of the required cuts. In comparison, non-OPEC countries only managed 25%. Some countries, such as OPEC members Iraq and Nigeria, even increased their output.
Why are oil producers cutting their output? The current six-month agreement, signed in December last year between the so-called OPEC+ alliance of oil producers, is designed to support oil prices following a 30% market plunge during the final quarter of last year. This is the second such agreement, the first of which was introduced in January 2017 in response to the 2014-15 downturn.
What next for OPEC+? In a Bloomberg article earlier this week Julian Lee described the agreement as “standing on one wobbly leg” due to the substantial gap between the two biggest producers: Saudi Arabia and Russia. Saudi Arabia has heavily reduced its output, shouldering more than half of OPEC’s cuts. Russia meanwhile has opted to inch towards its targets, stating they will hit them in May (just one month before the current agreement expires). As OPEC looks to form a more permanent partnership with the Russian-led non-OPEC countries, the current disparities call into question whether such a plan is actually workable.