Oil producing countries were meeting yesterday in Vienna to review for the first time progress on implementing a landmark December deal to slash output that is aimed at boosting prices.
The December 10 accord obliges around a dozen nations led by Russia that are outside the Organization of the Petroleum Exporting Countries to reduce output by 558,000 barrels per day (bpd). At the same time, countries within OPEC agreed to implement a previous accord struck among themselves on November 30 to cut production by 1.2 million bpd from January 1.The producers hope that this combined 1.8 million bpd will reduce a global glut that has depressed oil prices and battered their public finances, despite being good news for consumers.
The meeting at OPEC headquarters was of a new "OPEC Ministerial Monitoring Committee" comprising Kuwait, Algeria, Venezuela from OPEC, and Russia and Oman from outside the cartel. Also present was Saudi Arabian Energy Minister Khaled al-Falih. Arriving in Vienna, he said producers have already removed 1.5 million bpd from the market, Bloomberg reported.
Russian Energy Minister Alexander Novak was also upbeat, saying Moscow was "ahead of schedule" and "doing our best to maximise participation" in the agreement, Bloomberg reported. The deal to cut output marked a dramatic reversal of OPEC's previous Saudi-led strategy of flooding the market to squeeze U.S. shale oil producers, which need a higher oil price to make money. Markets initially welcomed the accord, sending oil prices up to an 18-month high of $58. But they have since slipped on concerns that countries may not stick to their commitments - as has happened under previous deals - and that higher prices will boost U.S. output.
OPEC's production fell by 221,000 bpd to 33.1 million bpd in December, according to secondary sources data in OPEC's monthly report published last week. Under the deal it agreed to reduce output to 32.5 million bpd. However that includes about 740,000 bpd from former member Indonesia, Bloomberg reported. Russia has pumped on average 11.1 million bpd in January, down 108,000 bpd from official government figures for both November and December, initial Energy Ministry data compiled by Bloomberg show. Moscow said it would make a daily reduction of 300,000 barrels by April or May, Bloomberg said.
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