OPEC supply cut participants reach 106 per cent compliance in May

OPEC supply cut deal undercut by increased US, Libyan, Nigerian production

Participants in the OPEC supply cut pact reached 106 per cent compliance with their pledges, according to Reuters’ sources familiar with the matter.

OPEC members taking part in the agreement complied 108 per cent with their commitments while non-OPEC participants’ compliance was at 100 per cent.

Another source told Reuters compliance by all producers last month was 106 per cent.

 

“This is the highest compliance since the beginning of the deal,” one of the sources told Reuters.

A technical committee comprised of OPEC and non-OPEC members met in Vienna on Tuesday to monitor compliance with the pact.

Last November, members of the Organization of the Petroleum Exporting Countries and some non-members, including Russia, agreed to cut their crude supply by 1.8 million barrels per day (b/d) beginning in January and it was to end this month.

At the end of May, most of the participants agreed to extend the deal into the first quarter of 2018.  Despite the extension of the deal, oil prices have dropped significantly since the meeting.

Benchmark Brent crude fell to a seven-month low near $45/barrel on Tuesday on investors’ concerns over the global oversupply.

Increasing shale production from the US and recovering production from Libya and Nigeria, both countries are OPEC members but were exempted from the deal, has added to the glut.

Some OPEC delegates are wondering if the OPEC supply cut agreement is enough to balance the market and bring oil prices back up.

Saudi Arabia’s Energy Minister Khalid al-Falih says the market is heading in the right direction and needs time to rebalance.