Oil Market Update: Compliance with OPEC’s Production Cut Deal ‘Extremely High’

Oil Market Update: Compliance with OPEC’s Production Cut Deal ‘Extremely High’

The global oil market is stabilizing thanks to the full compliance of the OPEC countries to the cartel-administered deal that seeks to curb supply in order to prop up crude prices, Saudi Oil Minister Khalid al-Falih said in Baghdad over the weekend.

This declaration comes after the comments made by the Secretary General of OPEC, Mohammed Barkindo, earlier this month who said that production cut deal had had a “extremely high” compliance. “The market has improved a lot but has still some way to go,” Mr. Falih told reporters during a visit to the Iraqi capital, adding that “compliance within the group of 24” nations taking part in the cutbacks deal “exceeds 100 percent”. It is not clear which ones of the 24 countries were compliant.

OPEC, Russia and other producing countries have cut production by approximately 1.8 million barrels per day (bpd) since the beginning of last year, helping to boost oil prices. The cutbacks should continue until March 2018 and Saudi Arabia and Iraq were aligned on the need to “fully comply” with cutbacks in crude output agreed by OPEC, Russia and several other producers to push up prices, Mr. Falih said after meeting with his Iraqi counterpart Jabar al-Luaibi. OPEC did not say whether the cartel would recommend that curbs be extended further when OPEC meets next month.

Saudi Arabia and Iraq are OPEC’s largest and second largest producers. The two countries began working on their relationship in 2015 after 25 years of troubled relations that started in 1990 with the Iraqi invasion. “The best example of the importance of cooperation between our two countries is the improvement and stability trend seen in the oil market,” Mr. Falih commented.