OPEC+ panel doubles down on compliance with output policy

The top OPEC+ Ministers met to keep the oil production policy unchanged, including a plan for a gradual increase in output starting from December. They also stressed that some members must make additional cuts to compensate for excessive output.

On Wednesday, a number of ministers of the Organization of the Petroleum Exporting Countries (OPEC+) and its allies, led by Russia, met online in a joint ministerial monitor committee (JMMC).

In a press release issued after the meeting, OPEC stated that "the JMMC emphasized how critical it is to achieve full conformity and compensate," "Furthermore the Committee will continue to assess market conditions."

The oil price dropped below $70 per barrel for the first since 2021 in September, but has since risen above $75 due to concerns that a possible Middle East escalation following Iran's attack on Israel may disrupt production from the region.

OPEC+ has agreed to reduce its output by a total amount of 5,86 million barrels per daily (bpd), which is about 5.7%, as part of a series steps since the end of 2022.

As part of the gradual unraveling of its latest layer of voluntary reductions extending to 2025, the group plans to increase production by 180,000 bpd in December. After prices dropped, the hike was postponed from October.

Sources who attended the meeting said that compliance with international standards was a major topic of discussion. This is expected to continue in the coming weeks, especially for Iraq and Kazakhstan.

These nations have committed to compensatory cuts of 123,000 BPD in September, and even more in the following months, in order to compensate for their overproduction.

The OPEC statement stated that Iraq, Kazakhstan, and Russia informed the meeting they had met their September commitments.

The statement said that this information will be confirmed by secondary sources, namely the price reporting agencies and consultancies used by the group to determine the output levels of its members.

Last week, an OPEC+-source said that if it is clear whether compensation cuts in September were made or not, the December increase can go forward.

Analysts said that a failure to comply with the agreement could lead Saudi Arabia and other countries to increase their output even more rapidly from December.

Helima Croft, of RBC Capital, said in a recent report that "if they do not comply we can see a faster sunsetting of voluntary cuts."

The JMMC is a group of oil ministers that includes Saudi Arabia, Russia, and other major producers. It meets about every two months, and it can make policy recommendations.

The next meeting will be held on 1 December, before the full OPEC+ meeting. (Editing by Barbara Lewis & Mark Potter)

(source: Reuters)