EMEA News
Saudi Arabia Continues to Slash Output, as Iran, Iraq, Angola and Other Players Mitigate Success of OPEC Cutback Initiative
The Organization of the Petroleum Exporting Countries (OPEC) is reportedly only 70 percent of the way in its oil production cutbacks towards reaching the level it thinks will eliminate the global glut and boost prices, and presumably narrowing this gap will be even more difficult to achieve with news Thursday that Iran is pumping in excess of its goal and production from normally compliant-friendly Angola failed to meet its reduction target last month.
This comes on the heels of Russia, which in December pledged to reduce supply by as much as 300,000 barrels per day (bpd), failing last month to pump lower than its January output figure of 11.1 million bpd.
Meanwhile, even though Bloomberg data shows that Iraq's production dropped by 50,000 barrels to 4.44 million bpd, its exports increased to 3.85 million barrels a day last month, about 39,000 barrels a day more than in January; shipments from Basra grew by about 1 percent, and sales by the Kurdish regional government in the north of the country rose about 9 percent.
Bloomberg calculates Iran's February output to be 3.83 million bpd, above its goal of 3.797 million bpd; as for Angola, the start of two oil projects in that country resulted in a ramp up of 20,000 barrels to 1.69 million bpd last month.
The bad news continues with Libya and Nigeria, both exempt from the OPEC agreement, which contributed to a combined 50,000 bpd growth in February.
OPEC's only viable claim to success is that it is so far achieving a 94 percent compliance rate, but that is only possible thanks to Saudi Arabia compensating for the shortcoming of other members by cutting more than it had agreed to: Riyadh lowered its oil supply by 90,000 bpd from a month earlier to 9.78 million in February.
The fear is that the Saudis' patience will soon run out and the OPEC deal will not be extended, but Forbes believes the opposite: markets analyst Panos Mourdoukoutas writes, "Saudi Arabia's output cuts are just the beginning of a trend that is expected to last for months and years to come, irrespective of what American frackers do.
"To begin with, the kingdom has learned a lesson the hard way: it cannot end the American fracking revolution by engaging in a price war with American frackers, which have demonstrated an exceptional ability to survive even at extremely low prices."
Mourdoukoutas adds, "Moreover, Riyadh's leaders do not want to antagonize the new Washington administration by declaring another war on American frackers."
He concludes that the biggest reason is that the kingdom "may be running out of oil faster than previously thought: ts major oil fields have become mature, and new fields are hard to come by."
Khalid al-Falih, minister of energy, industry and mineral resources for the kingdom, last month praised U.S. president Donald Trump for his pro-energy stance, noting, "I think he wants a mixed energy portfolio that includes oil, gas, renewables, and to make sure his economy is competitive; we want the same thing in Saudi Arabia."
