On December 10th, OPEC signed an agreement with several non-members to remove 1.8 million bpd from the market for six months.
The agreement, designed to end the three-year supply glut and help the struggling nations whose economies depend on oil exports, has pushed oil prices to an 18-month high of nearly $60 per barrel.
This weekend, OPEC and Russia announced that several nations are ahead of schedule in implementing production cuts.
“We are ahead of schedule and we will continue,” said Alexander Novak, Russian Energy Minister. “We are doing our best to maximize participation in the fulfillment of the agreement.”
Kuwait, Algeria, Saudi Arabia, and Russia have already removed a combined 1.5 million bpd from the market.
Ministers from member nations met for dinner in Vienna Saturday night before an official meeting at the OPEC headquarters on Sunday. The meeting focused on how to assess and enforce the compliance of the 24 participating states. Those familiar with the details said they currently have no plans to use external agencies to track exports.
The group plans to meet again in February, said Algerian Energy Minister Noureddine Boutarfa, when they will discuss whether to monitor exports in addition to production.
Boutarfa is optimistic that the six-month plan will be enough. “If we really comply by 80-90 percent, it may not be necessary to continue,” he said. “We aren’t excluding it, but signals are positive.
Editor’s note: Given the financial strain of the oil producing countries, it is actually surprising that they can agree to make cuts in production. First, look for some covert cheating to occur and for the agreement to collapse if prices do not rise substantially (say, to at least $80 per barrel) within six months.
Also look for sabotage efforts of U.S. shale, alternative energy or anything else that competes with oil where possible. Remember the Russians have already funded efforts against fracking in the U.S.