Oil overproduction: OPEC+ asked to extend compensation period

Marco Green
September 19, 2020

The technical panel will meet later on Wednesday, while the Joint Ministerial Monitoring Committee (JMMC), co-chaired by the energy ministers of Saudi Arabia and Russian Federation, is meeting on Thursday to assess compliance rates and possible actions.

The comments by Prince Abdulaziz bin Salman, Opec's most influential minister, came after a virtual meeting of a key panel of Opec and allies, led by Russian Federation, known as Opec+.

The Organization of the Petroleum Exporting Countries (OPEC) and other producers in OPEC+ are now cutting 7.7 million bpd of output and the group stressed at a meeting on Thursday that it would take action against members not complying with the deal.

At a news conference after the ministerial meeting, the Saudi energy chief went on to tell OPEC+ that "work still needs to be done and I urge you all not to relax the efforts of the past three months".

As the recovery in demand continues, shipping analysts cut their estimates for all oil tanker earnings for third and fourth quarters, as well as for all of 2020, according to a Bloomberg survey of shipping analysts.

Iraq has signaled that it could ask the OPEC+ panel to allow it to extend the period in which it should compensate for its lack of compliance through November, instead of by the end of September.

Brent oil prices extended their gains to trade up 3 per cent on the news about a possible extraordinary meeting, above US$43 (RM117.49) per barrel.

He opened a key OPEC+ panel, known as the joint ministerial monitoring committee (JMMC), sitting beside the UAE Energy Minister Suhail bin Mohammed al-Mazroui.

The group warned that rising Covid-19 cases in some countries could curb energy demand despite initial indications of a decline in oil stocks.

OPEC+ agreed to maintain its current target to reduce the group's overall production by 7.7 million barrels per day.

The panel pressed laggards such as Iraq, Nigeria and the United Arab Emirates to cut more barrels to compensate for overproduction in May-July while extending the compensation period from September to the end of December.

Last month, ministers of OPEC nations and other major oil producers stuck to an agreement to lower production, underlining that only strict compliance could restore stability to prices sent plummeting by the coronavirus pandemic.

The technical panel also said it was concerned about the rise in the cumulative overproduction, which has reached 2.38 million bpd from May until August, according to the report.

Other reports by Click Lancashire

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