OPEC To Ease Production Cuts, Urges Member-Countries On Compliance
By Tayo Elegbede
The Organisation of the Petroleum Exporting Countries (OPEC) has agreed to ease production cuts as demand increases.
The OPEC, which reached the decision at the ongoing 20th meeting of the Joint Ministerial Monitoring Committee (JMMC), urged member-countries to comply with the production cut deal.
In his opening remarks, the JMMC Chairman, Abdul Aziz Bin Salman, Saudi Arabia’s Minister of Energy, said the conversation at the meeting will also surround participants who are unable to fully comply with the deal.
He stated that adhering to the deal is crucial because it enforces cohesiveness of the organisation’s role and the collective principal actions and shared responsibility.
The meeting, which is holding via video conference, is under the chairmanship of HRH Prince Abdul Aziz Bin Salman, Saudi Arabia’s Minister of Energy and co-Chair HE Alexander Novak, Minister of Energy of the Russian Federation.
The JMMC meeting confirms that cuts will be brought down to 7.7 million barrels per day as OPEC + agrees to ease production cuts as demand goes up.
The reduction in cuts comes in line with the group’s own phased strategy, which aims to gradually reduce the level of production cuts over time and in relation to oil markets.
Despite the official headcount coming down to 7.7 million bpd during August, the number of production cuts will still be above 8 million as producing states that failed to meet their cuts in May and June will have to compensate over the next months.
“We are acting collectively with unity and discipline as we are seeing results, and on the demand side we are seeing encouraging signs of improvement as economies around the world are opening, “said Prince Abdul Aziz Bin Salman.
The minister also noted that most of the new production would be consumed in domestic markets due to heightened demand, and would not add significantly to oil exports.
“As we move to the next phase of the agreement, the extra supply resulting from the scheduled easing of production cuts will be consumed as demand continues on its recovery part.
“In many Opec+ countries there will be an increase in demand for utilities as well as changes in travel patterns, posting a domestic demand for gasoline and diesel,” he added. “So despite a higher production target in August, there will be no change in our exports.”
For his part, Russian Energy Minister, Alexander Novak, emphasised the need for producing members to ensure their strict compliance with their agreed production cuts.
“It is now more important than ever to strictly adhere to the agreement of participating countries in our joint cooperation,” Novak said.
“Moving on to the next stage of the agreement does not cancel the obligations of countries that have committed to compensating for overproduced volumes,” he added.
“Oil prices also continued to trade in the low $40 range in the late afternoon hours of the UAE, with prices having largely found themselves in a stable position over the last few weeks, in large part due to Opec+ cuts since May.”
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