The new king of the OPEC cutback cheaters is revealed to be Kazakhstan. File Image / Pixabay
With Brent this week breaking the all-important psychological barrier of $70 per barrel, worry has intensified that there is nothing left to prevent U.S. shale producers from pumping even more and upsetting the positive effect of the Organization of the Petroleum Exporting Countries' (OPEC) output cuts.
But as far as OPEC's new president, the United Arab Emirates, is concerned, there's no reason to alter course on the back of rising prices.
The latest expert to warn about the American deluge is Fatih Birol, head of the International Energy Agency, who on Friday told delegates to an industry conference in Abu Dhabi that while oil prices at $65 to $70 per barrel is good for producers now, it will encourage more oversupply from U.S. shale drillers.
Suhail al-Mazroui, energy minister, UAE
There is no need to rush and put assumptions (about) what are we going to do
Presumably, this prospect overshadows Birol's other stated concern, that there might be a further decline in output from OPEC member Venezuela this year, as the Bolivian republic's worsening economy is making inroads into production.
But during the same conference, Suhail al-Mazroui, energy minister for the UAE, stated that this week's crude gains are backed by strong demand growth and a drop in oversupply thanks to OPEC, and he suggested that the market needs breathing room before any plans to alter course are considered.
He said, "I don't think any fundamentals have changed for us to consider (a change in the output agreement) or panic... There is no need to rush and put assumptions (about) what are we going to do."
Just as worries in 2017 about U.S. output continues unabated in 2018, so too has another less-reported 2017 phenomenon that could weigh heavily on a market rebalance: the prevalence of OPEC members who, despite giving media-friendly lip service to the output reduction deal, are overproducing anyway.
Bloomberg reported that Kazakhstan has overtaken Iraq to become the biggest over-producer in the cartel, with output rising over the past year due to the Kashagan field - this is despite Kazakhstan's pledge to pump 20,000 barrels per day (bpd) less under the OPEC agreement.
According to the country's economy ministry, total oil production climbed 10.5 percent to 86.2 million metric tons in 2017 from the year before - which implies that Kazakhstan's output in November and December was about 130,000 bpd above the OPEC target; moreover, Kazakhstan is said to be planning to increase production to 87 million tons this year, or about 1.81 million bpd compared with an OPEC target level of 1.74 million barrels.
A Bloomberg survey also showed that output in Iraq was about 70,000 bpd above its target in December.
The UAE energy minister has had a busy week hobnobbing with the press: earlier he told reporters that OPEC has been so successful in implementing and maintaining its production cuts that an alliance between the cartel and Russia might continue once the cutback deal expires at the end of this year.