As OPEC Opens Oil Taps, Allies Already Pumping More

OPEC and non-OPEC nations are seeking to bridge what has been a widening gap in their commitment to oil output cuts. After months of over-adhering to production curbs, OPEC agreed to scale back its compliance to 100 percent as part of an agreement to boost supply, reached at the group’s meeting on Friday.

How Each Nation Fared in May

OPEC compliance remained high in May, while non-OPEC adherence tumbled
Percentage of cutback target reached
-20
0
20
40
60
80
100
120
140
160
180
200
OPEC nations
 
Algeria
Angola
Ecuador
Eq. Guinea
Gabon
Iraq
Kuwait
Qatar
Saudi Arabia
U.A.E
Venezuela
Total
Non-OPEC nations
 
Azerbaijan
Bahrain
Brunei
Eq. Guinea
Kazakhstan
Malaysia
Mexico
Oman
Russia
South Sudan
Sudan
Total
Sources: Bloomberg calculates OPEC compliance from the producer group’s secondary source data; preliminary International Energy Agency data for crude production are used for non-OPEC calculations. Includes revised estimates.

Equatorial Guinea joined OPEC in late May 2017. In the absence of any OPEC announcement on the starting level for the nation’s output cuts, Bloomberg uses the IEA’s estimate of October 2016 crude production of 140,000 barrels a day from June 2017 onwards.

Note: OPEC member Iran was allowed to boost output slightly under the production deal and therefore is not listed in individual country data in this graphic.

The Organization of Petroleum Exporting Countries’ adherence to its side of the bargain stood at a near-record 162 percent in May, according to Bloomberg calculations from the producer club’s secondary-source data. For a group of non-OPEC nations led by Russia, the compliance rate was 54 percent, their second worst monthly performance since the curbs took effect in January 2017. The divide has never been so great.

Widening Gap

The two groups have increasingly diverged in complying with oil-cut targets
Cutback reached target
Cutback did not reach target
OPEC nations
*Target: 1,176
1,164
May162%
1,900
April171%
2,016
March167%
1,966
Feb.155%
1,827
Jan. 2018’18136%
1,605
Dec.135%
1,590
Nov.129%
1,519
Oct.103%
1,211
Sept.93%
1,089
Aug.96%
1,126
July86%
1,013
June82%
969
May109%
1,269
April104%
1,216
March109%
1,264
Feb.97%
1,125
Jan. 2017’1799%
1,153
Non-OPEC nations
*Target: 546
558
May54%
296
April70%
380
March73%
398
Feb.65%
357
Jan. 2018’1878%
427
Dec.99%
538
Nov.93%
510
Oct.114%
622
Sept.140%
762
Aug.130%
708
July76%
414
June75%
411
May79%
442
April80%
447
March63%
351
Feb.33%
185
Jan. 2017’1756%
310
Sources: OPEC secondary source estimates; Bloomberg, IEA preliminary estimates for non-OPEC nations. Includes revised data. Twenty-one nations are seeking to curb supply by almost 1.8 million barrels day combined, in most cases using October 2016 level as starting point. Targets are based on when the deal was struck in late 2016.

*Moves Equatorial Guinea’s output cuts to OPEC in line with the nation’s membership in the producer group. OPEC hasn’t officially said how it’s accounting for Equatorial Guinea.

Note: Targets and monthly production figures are in thousands of barrels a day.

To be sure, OPEC’s adherence has a huge involuntary component: Venezuela. The country promised to lower output by 95,000 barrels a day but cut by almost seven times that amount due to an economic crisis. Still, in May only two OPEC countries, Iraq and Equatorial Guinea, failed to curb supplies as promised.

May Crude Oil Production

Thousands of barrels a day
Cutback reached target
Cutback did not reach target
Non-OPEC nation
OPEC nations
  • 9,987
    Saudi Arabia
  • 4,455
    Iraq
  • 2,865
    U.A.E.
  • 2,701
    Kuwait
  • 2,666
    Libya/Nigeria
  • 1,525
    Angola
  • 1,392
    Venezuela
  • 1,031
    Algeria
  • 585
    Qatar
  • 519
    Ecuador
  • 189
    Gabon
  • 130
    Eq. Guinea
Non-OPEC nations
  • 10,967
    Russia
  • 1,971
    Kazakhstan
  • 1,875
    Mexico
  • 971
    Oman
  • 801
    Azerbaijan
  • 654
    Malaysia
  • 209
    Bahrain
  • 155
    S. Sudan
  • 113
    Brunei
  • 70
    Sudan
Note: Nigeria and Libya agreed to limit their combined output to 2.8 million barrels a day from Jan. 1, 2018, which they have done so far.

Compliance outside of OPEC has gone from bad to worse. Just three of the 10 non-OPEC producers participating in crude oil supply cuts honored their pledges in May. Among those who failed to do so are Russia, responsible for more than half of the non-OPEC cuts, and Kazakhstan, which increased output to the highest level since the start of the curbs.

By How Much Did Countries Reduce Crude Production?

Thousands of barrels a day
Target
Cutback reached target
Cutback did not reach target
Non-OPEC nation
OPEC nations
  • Venezuela
    −95
    −675
  • Saudi Arabia
    −486
    −557
  • Angola
    −78
    −226
  • U.A.E.
    −139
    −148
  • Kuwait
    −131
    −137
  • Iraq
    −210
    −106
  • Qatar
    −30
    −63
  • Algeria
    −50
    −58
  • Ecuador
    −26
    −29
  • Gabon
    −9
    −13
  • Eq. Guinea
    −12
    −10
Non-OPEC nations
  • Russia
    −300
    −262
  • Mexico
    −100
    −228
  • Oman
    −45
    −41
  • Azerbaijan
    −35
    −13
  • Brunei
    −4
    −12
  • Sudan
    −4
    −6
  • Bahrain
    −10
    −4
  • Malaysia
    −20
    +16
  • S. Sudan
    −8
    +51
  • Kazakhstan
    −20
    +203
Sources: Bloomberg, IEA estimates for non-OPEC nations; OPEC secondary-source estimates.

OPEC’s deal on Friday would allow the group to boost production by 1 million barrels a day, at least on paper. Since some countries can’t physically add to their output the real increase will be about 700,000-to-800,000 barrels a day, according to Iraq’s oil minister, though Iran has said it may be less than that.

Price and Production

Oil prices have risen with high OPEC compliance
Brent crude oil price as of
Total OPEC production (thousands of barrels a day)
Sources: Bloomberg, ICE Futures Europe

OPEC is trying to maintain stability in oil prices with its agreement, though it’s being vague about individual country production going forward. For some nations, easing output may be a somewhat irrelevant exercise: they’re doing it anyway.