On June 5, OPEC representatives said that OPEC will meet at 2 pm local time on Saturday (20:00 Beijing time), and the OPEC+ meeting will be held at 4 pm local time on Saturday (22:00 Beijing time) .
Controversy over the implementation rate of production cuts
The reason why OPEC+ did not meet as planned on June 4 was because some member states were cutting production. “Cheating” has caused dissatisfaction with Saudi Arabia and Russia. They have previously stated that the convening of the OPEC+ meeting depends on the implementation of crude oil production cuts by various countries.
The “countries” here mainly refer to Iraq. As OPEC’s second largest oil producer, Iraq itself admits that it has not yet reached its OPEC+ production reduction quota. According to data from shipping intelligence company Kpler, its production reduction implementation rate is only 64%, which is a big blow to the morale of all parties involved in the production reduction agreement.
Other oil-producing countries that have not met the standards include Nigeria, Angola and Algeria. Among them, Algeria’s implementation rate of production reduction is only 7%.
In contrast, Saudi Arabia exceeded its production cut, with an excess rate of 37%, and Saudi Aramco cut its production by 3.35 million barrels. /day; Russia reduced production by 2.3 million barrels per day, with a compliance rate of 93%; even Mexico, which strongly demanded special treatment in early April, reduced production by 152,000 barrels per day, higher than the agreement of 100,000 barrels per day.
OPEC+’s two largest oil-producing countries are full of sincerity and have temporarily united. Of course, they will not allow Iraq, OPEC’s second largest oil-producing country, to continue to drag its feet and muddle through. Although Iraq has its own difficulties, but the implementation rate of 64% is too low anyway.
Jinshi’s previous report pointed out that Iraq cannot refuse the temptation to sell oil to make profits. Moreover, the Iraqi central government has very limited influence on the semi-autonomous Kurdish region. Kurdistan is one of Iraq’s main oil-producing areas, with a daily crude oil output of up to 500,000 barrels.
In terms of news, Iraq informed OPEC+ on Thursday that it will fully implement production cuts by the end of July, but it is also facing the above-mentioned problems, and none of them seem to be solved in a short time, so Whether Iraq can finally fulfill its promise may become a risk point for the crude oil market in the future.
Analysis points out that if OPEC+ cannot reach an agreement on extending the production reduction agreement, millions of additional barrels of crude oil may flow to the market, hindering the recovery process of the oil market. And U.S. shale oil producers may restart oil wells at any time, so OPEC must carefully manage crude oil production and not exceed the speed of demand recovery and undermine the rebalancing of the oil market. Bob McNally, founder of energy consultancy Rapidan Energy Group and a former White House official, said: “Under the leadership of Russia and Saudi Arabia, the production cuts urged by OPEC+ have not been implemented in place. Countries (especially Iraq) have fully reduced their production to cope with the serious oversupply problem in the crude oil market. This move has no harm at all.”
<br
