As expected by international experts, the ambitious plan of cutting oil production by OPEC and other oil producers led by Russia are seeing some difficulties during the implementation phase. The OPEC is indicating slower-than-expected oil production cuts in 4 non-OPEC countries participating in the agreement.
Shortly after signing the agreement to cut oil production simultaneously, the OPEC members found themselves betrayed. According to the cartel’s estimates, the production cuts outside of the cartel are implemented only by 50% while inside the OPEC this is 92%. Even though the OPEC hasn’t made any open statements criticizing their non-OPEC partners, the cartel may well show their discontent with Russia and other participants of the agreement in the near future.
According to the agreement, Russia should be the one responsible for the biggest share of non-OPEC production cuts. However, instead of being cut, Russia’s oil export seems to be growing. On top of that, the OPEC is going to discuss the situation for those non-OPEC countries in February.
Even though the 4 countries were not specified during the statement, experts say that Russia is likely to be on the list. Over the first half of 2017, the non-OPEC participants of the oil agreement are obliged to cut their total production by 558K barrels a day relatively to the production volume seen in October 2016, with Russia being responsible for 300K bpd of that production cut. As for the OPEC, they have agreed to cut their total production by 1.2 million barrels per day. According to the February report, the OPEC’s production cuts reached 890K barrels per day.
The biggest cuts were implemented by Saudi Arabia, Iraq and the United Arab Emirates. At the same time, the oil production in Nigeria, Libya, and Iran increased. As of Russia, the planned production cuts are going to be implemented in several steps. Russia claims to have cut the local oil production by 117K barrels per day in January 2017 as opposed to the levels of October 2016. If that’s really the case, that’s twice as much as planned to be cut over the reporting period. This seems to be less oil production but more oil export for Russia.
