Members of the Organization for Petroleum Exporting Countries (OPEC) and some non-OPEC producers agreed to jointly reduce supply by an additional 500,000 b/d, through the end of March 2020. The reduction expands current production curtailments of 1.2 million b/d by roughly 40%.
Russia has yet to endorse the additional supply cuts but is generally expected to do so tomorrow at the second day of the organization’s meeting in Vienna. But Sara Vakhshouri, president of consultant SVB Energy International, cautioned that domestic needs in advance of winter might make it difficult for Russia to agree to or comply with further reductions. Russia produces large amounts of condensate in conjunction with its natural gas and would be hard-pressed to reduce these levels during the heating season, Vakhshouri noted.
Initial reactions to the announcement were mixed. OPEC is already in overcompliance with its existing supply reduction and Iraqi oil minister Thamir Ghadhban strongly suggested on Dec. 4 that an additional cut would happen.
Further complicating OPEC’s efforts to exert market control are projections of surging non-OPEC production in 2020. Rystad Energy predicted in advance of the meeting that total non-OPEC production (both crude and condensate) would grow by roughly 2.26 million b/d in the year ahead, led by increases in the US (1.09 million b/d), Norway (527,000 b/d), and Brazil (459,000 b/d).
Contact Christopher E. Smith at [email protected].
