Saudis, Kuwait, Algeria Report Cutbacks by More Than Promised in Advance of Vienna Compliance Meeting

OPEC secretary-general Mohammad Sanusi Barkindo says he is "confident" that OPEC members and non-members will abide by the oil output agreement

As next week's meeting in Vienna approaches to determine the progress made by participants in the Organization of the Petroleum Exporting Countries' (OPEC) oil cutback agreement, boosters of the meeting and the agreement are predicting that all will ultimately go well – as long as everyone contributes to the cutbacks.

Suhail al-Mazrouei, energy minister for the United Arab Emirates, told delegates at the Atlantic Council Global Energy Forum in Abu Dhabi that following the Vienna evaluation, an action plan will be put together to help achieve OPEC's goal of removing a total of 1.2 million barrels per day (bpd) from the overly saturated global market.

Mazrouei added that international oil prices for January have made "a fair movement towards a correction" and are on the right path to balance the market.

But he stressed that "the real correction will happen when we see some action from the concerned group who came together," in reference to a December meeting between OPEC members and major international producers such as Russia and Oman.

Mazrouei remarked, "I personally have lots of trust in the commitment of those countries; there's definitely a sincereness."

Mohammad Sanusi Barkindo, secretary-general of OPEC, told the same forum he is "confident" that OPEC members and non-members will abide by the agreement: "I remain very confident with what I have seen in the last several months; the level of commitment from both sides ... is unparalleled."

Speaking to the Abu Dhabi delegates, Khalid Al-Falih, energy minister for Saudi Arabia, said although his kingdom agreed to cut 486,000 bpd to 10.058 million bpd, it is actually producing less than 10 million bpd, with exports at a 22 month low: "We're going the extra mile to lead our colleagues within and outside of OPEC, to make sure that the market sees that there's serious action in place."

Kuwait's oil minister followed suit by telling delegates his country had also exceeded its targeted cut, and Algeria's energy minister said his nation will reduce output by more than its quota.

Taken at face value, the remarks would suggest that the OPEC agreement is a raging success in advance of any hard-numbers evidence; but recent record output from cutback allies such as Russia and Iraq (which is preparing to ship a record 3.64 million bpd of crude in February) has caused Robert Yawger, director of the futures division at Mizuho Securities USA, to state that cracks may be appearing in the wall of the OPEC deal.

For the record, Energy Aspects said in an e-mailed report that OPEC is likely to achieve 80 percent compliance, a level "higher than the not-so-shabby historical average of 66 percent" - however, the market is "dubious of any compliance at all."

Add Libya and Iran to the mix of aggressive world producers, and OPEC's success ahead of the facts become even less certain, ditto the idea that oil prices can fully rebound to the extent optimistic forecasters have predicted; indeed, more sober-minded experts such as Deloitte believe a modest $55 average will be the norm this year.