OPEC report shows uneven delivery of new oil production cuts

OPEC only partially delivered new oil production cuts in the first month of its latest supply pact, according to a report from the group.

The Organization of Petroleum Exporting Countries and its allies pledged significant output curbs this quarter in a bid to avert a surplus and shore up global prices. While Kuwait and Algeria promptly implemented their share, Iraq’s reduction fell far short of the agreed amount, according to Bloomberg.

Baghdad, which has a patchy record of adhering to OPEC quotas and faces strong financial pressures to maintain revenue, cut by 98,000 barrels a day in January — about a third of the reduction needed to meet its target, according to the report published on Tuesday. The country has said it’s fully compliant with its pledges.

The uneven compliance adds to the challenge of balancing world oil markets faced by OPEC, which also nudged up its estimates for rival oil supplies this year and next by 150,000 barrels a day. 

“Given current market circumstances, ongoing efforts” by the group and its partners “remain critical to achieving a balanced and stable oil market,” the organization’s Vienna-based secretariat said in the report.

Crude has remained near $80 a barrel in London so far this year as the sense of plentiful supplies from the US and elsewhere allay fears over conflict in the Middle East. Brent futures traded for $82.60 as of 12 p.m. London time.

OPEC — led by Saudi Arabia — continues to predict that global oil demand will increase by a “healthy” 2.2 million barrels a day, driven by China, to a record of just over 104 million barrels a day this year.

“We are seeing positive signs of good revisions to some parts of the global economy, most notably the United States,” Secretary-General Haitham Al Ghais said at a conference in Dubai on Tuesday. 

This bullish analysis isn’t universally shared. 

Saudi Aramco anticipates considerably slower, though still “robust,” demand growth of 1.5 million barrels a day this year, Chief Executive Officer Amin Nasser said in Dhahran on Monday. Major traders such as Vitol Group and Gunvor Group Ltd. have outlined similar views.

The International Energy Agency, which represents major consumers, projects demand growth of 1.2 million to 1.3 million barrels a day, Executive Director Fatih Birol told Bloomberg television on Tuesday. This should result in a “comfortable” market and “moderate prices,” he said. 

Output from OPEC’s 12 members declined by 350,000 barrels a day in January, according to the group’s report. Almost half of this reduction stemmed from a pipeline disruption in Libya, which is exempt from the agreement to voluntarily constrain supplies. 

Iraq pumped 4.19 million barrels a day, or about 190,000 above its limit, according to OPEC, which derives its estimates from the average of seven external agencies known as the secondary sources. Iraqi Oil Minister Hayyan Abdul Ghani said on Monday that the country is producing no more than 4 million a day.

Implementation of the new cuts in the wider alliance known as OPEC+, which includes producers such as Russia and Kazakhstan, also remains unclear. Moscow has boosted fuel exports to a six-week high, and only temporarily pared crude shipments when forced to do so by winter storms.

The coalition’s current curbs, which amount to approximately 2 million barrels a day, run to the end of the quarter. Saudi Arabia’s energy minister has said they “absolutely” could be prolonged, and delegates aim to make a decision on extension in early March.