OIL PRODUCTION CUTS 1.5 MBD
WSJ - The Organization of the Petroleum Exporting Countries and Russian officials said Sunday they were making good progress on their pledges to cut back crude-oil production and raise global prices.
Saudi Energy Minister Khalid al-Falih said OPEC's 13 nations and 11 producers outside the cartel had made collective cuts totaling 1.5 million barrels a day since agreements were struck in late November and early December. Oil prices have risen nearly 20% since those deals were made, despite widespread skepticism over whether OPEC and other producers would follow through.
Mr. Falih also brushed off a new energy policy statement from the Trump administration, which said the U.S. would seek independence from OPEC but maintain close relationships with its Persian Gulf allies to fight terrorism.
"We in Saudi Arabia look forward to work closely, cooperatively, constructively with the incoming Trump administration, especially in the area of energy," the minister said.
The estimates being handed out on Sunday morning were preliminary and the officials didn't provide other important details, such as the current collective output of OPEC or whether Saudi Arabia was shouldering a larger load of cuts to make up for other members that aren't complying.
The cuts announced Sunday don't take into account rising production from OPEC members excepted from the output cuts, including Libya, where crude flows reached a three-year high this month.
The estimates were released as OPEC convened its first meeting to monitor compliance with its production-cut regime. Not all of OPEC's members were present—just Saudi Arabia, Qatar, Venezuela, Kuwait and Algeria, and nonmembers Oman and Russia.
The countries announced breakthroughs, including an additional monitoring committee that will include Saudi Arabia and meet every two months. Compliance for non-OPEC producers will be determined by an examination of data supplied by each government and an assessment of other sources such as shipping trackers, traders and pricing agencies.
The meeting was held amid widespread skepticism in the oil market that OPEC and its new allies will follow through on their pledges to cut what amounts to about 2% of global oil supply from the market.
Several OPEC members, including Venezuela, are going through severe economic contractions after over years of depressed oil prices, making production cuts potentially economically unfeasible and politically dicey as prices rise.
The doubt has helped put a cap on oil prices, which have hovered between $54 a barrel and $57 a barrel for international benchmark Brent crude since the agreement. Most OPEC members need higher prices to balance their national budgets and pay for their social-welfare programs.
But producers here said they were making progress. Venezuelan oil minister Nelson Martinez said his country had already delivered about half its pledged output cuts and would make good on the rest in the next month.
Venezuela's output has long been in decline because of underinvestment anyway, so its ability to cut wasn't necessarily questioned.
Among the non-OPEC members, Russia said it had already trimmed part of the 300,000 barrels a day it promised to cut and would cut the rest soon.
Overall, Mr. Falih said Sunday that compliance with the OPEC agreement was "fantastic." He said oil supply and demand—which has been tilted toward oversupply for several years—was moving back into balance faster because of the output cuts.
Mr. Falih reiterated comments that his country—the world's largest exporter of crude oil—had already cut its output by more than promised, to less than 10 million barrels a day. He predicted more cuts to customers in February and said output wouldn't go back above 10 million barrels a day.
OPEC officials on Sunday estimated its compliance level at 80%, meaning about four-fifths of the oil it pledged to cut has been slashed. That is a faster rate than in 2009, when the cartel had a compliance rate of about 57% a month after its agreement.
"The only acceptable rate is 100%" of compliance with the agreement, said Kuwaiti oil minister Essam Al-Marzouq, who leads the monitoring committee.
Efforts to raise prices face headwinds from producing countries that aren't part of any output agreement. U.S. production is ramping up quickly, threatening to bring new supplies back into the system and weigh down prices again.
"Even with increasing shale drilling, we still see a rebalancing of the market," said Qatari oil minister Mohammed al-Sada.
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