Oil in Global Economy Series: OPEC November deal compliance review

In November last year, when OPEC members agreed to cut production for the first time since the Great Recession, it was welcomed with great optimism and oil price jumped more than 20 percent, from $45 per barrel to as high as $55 per barrel (WTI). However, that optimism faded amid higher production from the United States and reports of impatience within the OPEC with lower oil price. Even a fresh agreement in May, between the OPEC and participating non-OPEC producers, failed to lift price.

However, as OPEC continues with its targeted production agreement, the oil has slowly turned from bearish to bullish on Middle East tension and as the market nears rebalancing. The oil price has reached the highest level since June 2015. In this article, we review the compliance among OPEC members based on November monthly oil market report.

WTI is currently trading at $57.4 per barrel and Brent at $6.2 per barrel premium to WTI.

• According to data from secondary resources, the OPEC remains broadly compliant with the agreement on an average production basis.
• It is important to note that overall production from OPEC including the exempted members like Nigeria, and Libya declined by 133,000 barrels per day In November compared to October and some members are yet to comply with the agreed level of output.
• In May, production increased by 366,000 barrels per day and in June, it increased by 393,000 barrels per day. However, in August production declined by 79,000 barrels per day from the previous month.
• It is important to note that while production declined in November, the decline from Iraq was less than expected despite conflict with Kurdistan.
• In November, Gabon, Ecuador, Iran, Iraq, and UAE are the five countries that were non-compliant with the production levels.