EMEA News
OPEC Hails 133% Oil Deal Compliance Despite More Evidence It Is Partially Circumstantial
Despite disclosures that the metric used to measure crude stockpiles is flawed, and despite ample evidence that the production cutbacks from many participating countries is at least partially by circumstance rather than intent, Mohammad Barkindo, secretary general for the Organization of the Petroleum Exporting Countries (OPEC), once again told media that his cartel's cutback strategy is a raging success.
Specifically, he stated on Monday that OPEC registered 133 percent compliance with agreed output reduction targets in January across all participating OPEC and non-OPEC countries.
Barkindo, who was speaking at a conference in Nigeria's capital Abuja, added that by comparison, compliance last year stood at 107 percent.
What this means in terms of market numbers is that commercial oil stocks for the OECD rose in January of this year and were about 74 million barrels over the latest five-year average; in other words, supposedly the cartel is closing in on its long-held goal of achieving proper supply and demand rebalance.
Barkindo was also enthused about global demand, which is estimated to grow 1.6 million barrels per day (bpd) due to what he referred to as an "encouraging environment."
Setting aside the question of whether OPEC's stockpile calculations can be trusted, Barkindo's persistent reporting of high compliance implies that the cartel's members and allies are voluntarily reducing their production in the spirit of relieving the global glut.
But in fact, and as was the case in 2017, the reduction numbers proudly reported to the press in 2018 have been due to civil unrest, pipeline outages, oilfield maintenance, and other factors beyond the control of countries such as Nigeria, Libya, and some Middle Eastern nations.
It is also a matter of record that Nigeria, Iraq, Iran, and many other OPEC members have publicly declared their intent to pump all out a soon as circumstances allow them to do so.
As if to underscore that OPEC members are complying with the cutbacks by default, Mustafa Sanalla, head of Libya's state-owned National Oil Corporation, disclosed on Monday that his firm is suffering ongoing delays in receiving its operating budget money from the government and that this could reduce production.
He said in a statement, "The entire sector is suffering from these problems because of delays in the finance ministry disbursing budgets to the corporation for this year.
"This slowdown will create negative consequences for the whole sector leading to a large decline in the level of production once more and a negative impact on development projects in the oil sector."
Reuters notes that Libya's production "remains well below the 1.6 million bpd it was producing before a 2011 uprising that led to armed conflict between rival factions, with competing governments set up in Tripoli and the east of the country."
When Barkindo last boasted about high compliance rates, in January, a Reuters survey showed that Nigeria, Iraq, and Algeria were pumping at record highs - which suggested that OPEC in 2018 was shaping up to have the same amount of cheaters that impacted its efficacy in 2017 and caused it to extend its reduction deal through this year.
