This weekend the representatives of OPEC and several other major oil producers outside of this group, including Russia, are meeting in Vienna for their first meeting to monitor compliance with the oil output cut agreement.
The meeting will establish a compliance mechanism to verify that producers are sticking to a deal to reduce output by 1.8 million barrels per day, said OPEC’s Secretary General Mohammed Barkindo.
Their plan is to figure out how to confirm that all 24 signatories of this historic deal are keeping to their pledges to reduce output and keep the agreed on amount of supply off the market for six months.
OPEC is keen to demonstrate that it has shed its hard-earned reputation for cheating, and that the group is serious about tackling the supply glut and lifting oil prices.
OPEC’s agreement to reduce output in tandem with non-OPEC Russia and several other producers in December was the first such move in 15 years.
“I have no doubts in Russia’s commitment to continue to participate with us and solidify this platform effectively establishing a stabilizing forum for the short, mid and long-term,” Barkindo said.
International oil prices rose to an 18-month high of more than US$58 a barrel after the OPEC and several non-members agreed on December 10 to end two years of unfettered production and instead cut output. Crude has since slid back down some 5 percent as speculators are concerned that commitments will not be met.
In December, OPEC’s production fell by 220,900 barrels a day to 33.085 million barrels a day, with the biggest drops coming from Saudi Arabia and Nigeria, according to secondary source data in the group’s monthly report published on 18 January.
The organization agreed to reduce its output to 32.5 million barrels a day, although that total included about 740,000 barrels a day of output from former member Indonesia.
Russia has pumped an average of 11.1 million barrels a day so far in January—108,000 barrels a day less than official government figures for November and December, according to initial data from the Energy Ministry, compiled by Bloomberg. Russia agreed to cut 300,000 barrels a day by April or May.
OPEC will meet in May to decide whether to propose to extend the output cutting measures together with non-OPEC countries.
By Damir Kaletovic for Oilprice.com