Oil in Global Economy Series: Will OPEC deal with its biggest cheating member in Vienna?

Tomorrow OPEC members and participating non-OPEC countries will meet at OPEC’s Vienna headquarter to decide on the future of the agreement that was first commenced in November 2016, with an aim to reduce global oil supplies by 1.76 million barrels per day compared to the November 2016 level. Unlike last time, in May this year when all the key parties like Saudi Arabia and Russia announced their support for an extension of the agreement, Russia has resisted calls to disclose its position ahead of the meeting.

While members will have to deal with whether to extend the agreement at this meeting or not, we wonder if any measure would be taken against those who participated in the agreement but yet to fully comply with it. Iraq, which has joined the agreement from the beginning, has been the biggest cheater among the participating countries. According to secondary sources, Iraq has produced more than the stipulated target in every month since the deal came into force in January 2016. The lowest amount of oil the country produced since the deal was in October this year, when a siege by Iraqi forces in the Kirkuk region of Kurdistan reduced production Even then, Iraq produced 4.383 million barrels per day, still above its target of 4.351 million barrels per day.

We expect Russia, and Saudi Arabia to take a stance against the members, who are not fully complying at tomorrow’s meeting.