OPEC members, to the surprise of many, were able to strike a production freeze deal in September to keep a lid on production and keep it between 32.5 million barrels to 33 million barrels. At the time of the deal, OPEC was producing around 33.25 million barrels per day as a cartel, which means there would not only be a freeze but production cut ranging between 0.25 and 0.7 million barrels per day. Though it wasn’t explicit and the final agreement would only be reached in November this year, it was understood that special provisions were recognized for countries like Iran (reviving from sanctions), Libya (civil war), and Nigeria (militant attack in the oil-producing region). We argued that such an arrangement would necessarily mean more than a million barrel per day production cut for members other than those mentioned above.  In addition to that, we argued in a previous piece that policing such quotas would be troublesome and advised our readers to keep their fingers crossed unless the clarification emerges.

In relation to the second, the trouble has already started surfacing. Countries have come out criticizing the OPEC secretariat with regard to the current production levels. The OPEC secretariat in Vienna compiles production estimate from the national oil reports and secondary resources. Iran said that its output in September was 3.89 million barrels compared to Secretariat’s estimate of 3.69 million barrels. A similar dispute surfaced with Iraq, where the gap is around 0.32 million barrels per day. Venezuela complained that the secretariat failed to count the heavy oil it produces in Orinoco Belt, which is around a quarter million barrels. These allegations indicate that a robust oil accounting in the OPEC is missing and without such the deal would remain in jeopardy.

WTI is trading at $50.4 per barrel and $52 per barrel.