The Joint Ministerial Monitoring Committee overseeing the OPEC/non-OPEC supply agreement will no longer track individual country compliance with quotas, as the deal has now shifted to a collective production ceiling, Saudi energy minister Khalid al-Falih has told the other members.
Falih, who chairs the JMMC, said the entire coalition’s compliance with the ceiling will continue to be monitored and reported, according to a letter sent Thursday to his counterparts, a portion of which was seen by S&P Global Platts.
“The shift from reporting individual country conformity to reporting overall conformity will be adopted to reflect the June 23 decision of the 4th OPEC and non-OPEC Ministerial Meeting that countries will strive to adhere to the overall conformity level, voluntarily adjusted to 100%, as of July 2018,” Falih wrote.
Iran, Saudi Arabia’s chief geopolitical rival, has insisted that the supply accord would be breached if members exceed their individual quotas and infringe on others’ market share, as it faces the prospect of significant losses to its crude oil exports later this year as US sanctions go back into force.
Iranian and Saudi officials could not immediately be reached for comment.
The JMMC has never publicly revealed individual country performance on quotas but has used the data to privately pressure non-compliant members to do their fair share since production cuts were implemented in January 2017 to help draw down oil in storage.
With the market now rebalanced and US President Donald Trump pressuring Saudi Arabia to cool the market, OPEC agreed June 23 in Vienna with Russia and nine other allies on a 1 million b/d output boost to head off expected supply disruptions from US sanctions on Iran and Venezuela’s economic crisis.
But the coalition has left unsettled how the extra barrels would be shared out. Saudi Arabia maintains that countries with the capacity to pump more — primarily itself and its Gulf allies ? would take on the production increase.
COMMITTEE MEETING WEDNESDAY
A technical committee of delegates from the JMMC — which is composed of Saudi Arabia, Russia, Kuwait, Venezuela, Algeria and Oman — is scheduled to meet Wednesday at the OPEC secretariat in Vienna to review market conditions.
Representatives from the UAE, whose energy minister Suhail al-Mazrouei holds the rotating OPEC presidency for 2018 and is a close ally of Falih, will also attend.
The meeting may not be a mere formality, as Venezuela was aligned with Iran in opposing an output increase that allows members to exceed their quotas.
Saudi Arabia has already broken its cap, telling OPEC it produced 10.49 million b/d in June, far above its quota of 10.06 million b/d, according to the producer group’s monthly oil market report released Wednesday.
OPEC as a whole produced 31.99 million b/d in June, according to the latest S&P Global Platts survey of OPEC officials, analysts and industry sources, still more than 700,000 b/d below its ceiling when every country’s quota is added up.
Iranian officials have said OPEC unity is at stake, with oil minister Bijan Zanganeh writing to Mazrouei on June 30 that it was the president’s role to either call for an extraordinary meeting or seek consensus through communication with the member countries.
“Regrettably, unilateral behaviors in production increase by some member countries is weakening the very foundation of our organization,” Zanganeh wrote.
Mazrouei responded in a letter seen by Platts on Thursday, saying it was up to the JMMC to assess how the coalition complies with its aim of bringing “overall conformity levels” down to 100%.
“I can provide firm reassurance that the JMMC will closely monitor the situation with a goal of assuring 100% compliance from OPEC members to the agreed 1.2 million b/d voluntary reduction in oil production,” Mazrouei wrote.
The committee is scheduled to meet September 22-23 in Algiers, while OPEC’s next full meeting is December 3 in Vienna.
Source: PlattsPrevious Next
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