Oil in Global Economy Series: OPEC September 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 1.5 percent since the May agreement. In this article, we review the compliance among OPEC members.

• According to data from secondary resources, the OPEC remains broadly compliant with the agreement on an average monthly production basis.
• It is important to note that overall production from OPEC including the exempted members like Nigeria, and Libya increased by 88,000 barrels per day In September compared to August 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. The decline was largely due to production decline in Libya, which dropped from a million barrels in July to 0.87 million barrels in August.
• Libya’s production recovered to 0.923 million barrels per day in September.
• In September, Algeria, Ecuador, Iran, Iraq, and UAE are the only five countries that were in compliant with the production levels.

WTI is currently trading at $51 per barrel and Brent at $5.6 per barrel premium to WTI.