Oil in Global Economy Series: OPEC August 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. Oil price is still down more than 6 percent since the May agreement. In this article, we review the compliance among OPEC members.

According to data from secondary resources, the OPEC failed to comply with the agreed production deal for a third consecutive month in August. It is also not in compliant with average production basis. It is also important to note that overall production from OPEC including the exempted members like Nigeria, and Libya increased by 173,000 barrels per day 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.

In August, Angola, Gabon, Kuwait, Qatar, Saudi Arabia, and Venezuela are the only six countries that were in compliant with the production levels.

WTI is currently trading at $48.2 per barrel and Brent at $5.9 per barrel premium to WTI.