OPEC, non-OPEC states unlikely to cancel production cut deal

Laura Christensen
July 25, 2017

Crude futures settled higher on Monday, after Opec producer Saudi Arabia pledged to lower crude exports in August while Nigeria agreed to curb production. Estimates are that OPEC production in July will exceed 33 million bpd, with production increasing from the United Arab Emirates, Nigeria, and even heavyweight Saudi Arabia.

In December, OPEC agreed with several non-OPEC producers led by Russian Federation to cut oil output by a combined 1.8 million barrels per day (bpd) from January 2017 until the end of March 2018 but Nigeria and Libya were exempted.

Some analysts praised Nigeria decision to agree to cap production but expressed concerns about Opec's compliance rate - with the deal to curb production - which fell to 78% June, the IEA said in its report earlier this month.

"Russia has already called on OPEC to cap output from Nigeria and Libya in the near future and it will be interesting to see if any new agreements are proposed for both nations to join the oil production cut agreement".

This is given increased oil production in the Niger Delta following peace talks in the area that has caused violent attacks on oil facilities to cease.

Ahead of the OPEC meet in Russian Federation today, both Brent Crude at 48.21, and WTI Crude Oil at 45.86 have corrected sharply, and tested their respective supports of 48 and 46.

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Elsewhere, Brent oil for September delivery on the ICE Futures Exchange in London rose 53 cents, or about 1.1%, to $48.59 a barrel, after touching a more than one-week low of $47.70 in overnight trade.

Ahead of the meeting, Kuwait's oil minister Essam Al-Marzouq said that compliance with oil production cuts by OPEC and non-OPEC countries had been good and that deeper cuts were possible.

U.S. oil rig count dropped by one to 764 in the week to July 21, according to Baker Hughes data, the second week-on-week drop in a month.

"Opec will want higher prices to support domestic budgets, but not excessively high that it leads to global oil demand erosion", said Emma Richards, senior oil and gas analyst at BMI Research.

"OPEC secretary-general Mohammad Barkindo said that the oil market is gradually rebalancing but more slowly than expected". That represents a cut of 1M from last years exports. USA crude was up 0.9% to $46.19.

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