Ahead of the Organization of Petroleum Exporting Countries and non-member countries known as OPEC+ Technical Monitoring Committee Meeting next week, there is a palpable tension that the landmark oil cut deal agreed to might be truncated by Iraq’s repeated noncompliance.
This noncompliance is expected to in turn curtail the slight recovery oil prices have been enjoying in recent weeks.
Brent, against which Nigeria’s crude oil is priced, climbed by 0.34 percent to peak at $45.15 per barrel as of 5:00 pm Nigerian time on Tuesday signaling a steady increase.
This slight recovery in oil prices is now being threatened by Iraq’s noncompliance. Iraq has been promising to stick to the production cut deal since the beginning of July but has failed to do so.
Iraq produced 3.697 million barrels of oil per day in July, compared with 3.698 million barrels per day in June which is in contravention of its agreed 3.592 million BPD quota.
In August, Iraq was originally supposed to produce 3.804 million barrels per day. But Iraq must now cut an additional 400,000 BPD to make up for the overages of the last few months.
In particular, Iraq, Nigeria, Angola, and Kazakhstan have come under intense scrutiny from their OPEC+ counterparts for their excess output.
While Saudi Arabia did manage to get Nigeria and Iraq to agree to make up for any overproduction in May and June—and now July—by continuing to under-produce their quota in August and even beyond, Iraq has however repeatedly failed to comply.
Now, a key monitoring committee co-chaired by Saudi Arabia and Russia, the two largest OPEC+ members, will meet on August 18 to assess compliance and hash out the compensation cuts with Iraq now expected to answer to committee.
Also, Quota compliance monitored by S&P Global Platts revealed that compliance from members and its allies fell to 96 percent in July, from 106 percent in June, with their collective production increasing by 1.10 million barrels per day.
The oil price recovery is essential to OPEC nations; hence monitoring and ensuring compliance is paramount as supply cannot continue to override demand, especially with demand lingering.
