Oil in Global Economy Series: OPEC April deal compliance review

In November 2016, 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 2014. The geopolitical factors such as Trump canceling the Iran deal has also been helpful. It is facing some headwinds from higher oil production in the United States. In this article, we review the compliance among OPEC members based on May OPEC monthly oil market report.

WTI is currently trading at $70.6 per barrel and Brent at $6.5 per barrel premium to WTI.

• According to data from secondary resources, the OPEC remains more than 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 rose by 12,000 barrels per day In April compared to March.
• Venezuela saw another sharp drop in production to 1.436 million barrels per day.
• Libya and Nigeria produced 0.982 and 1.791 million barrels per day in April, respectively.