Outside Russia and OPEC, Few Are Pledging To Cut Oil Output
Less than half of 14 major oil-producing countries have agreed so far to attend a meeting on December 10 aimed at securing their public commitment to output cuts sought by OPEC, cartel officials said on December 8.
The Organization of the Petroleum Exporting Countries announced its first major output cut in eight years last month to prop up sagging prices, and said it would seek to supplement its own cuts of 1.2 million barrels a day with commitments to reduce production by producers outside the cartel by another 600,000 barrels.
However, producers outside OPEC so far have fallen short of pledging such a large cut in production. Only Russia has publicly committed to cuts, providing half the amount sought, or 300,000 barrels a day.
It is not clear where the other 300,000 barrels in cuts would come from. So far, only five non-OPEC producers — Azerbaijan, Kazakhstan, Oman, Mexico and Russia — have agreed to attend the weekend meeting in Vienna.
Brazil and Norway are no-shows, and the United States — which consumes all the oil it produces plus some — is a free-market advocate and was never expected to come.
Outside of Russia, only Oman and Azerbaijan have publicly stated that they are ready to cut production, though they have not specified by how much.
Kazakhstan has said it is undecided. It just started up its Kashagan field after a decade of delays, and stakeholders must start producing next year to recoup $55 billion in investment. It is expected to produce another 200,000 barrels a day in 2017.
While OPEC President Mohammed al-Sada was confident last month that more cuts would be found, OPEC sources said they may fall short of pledges, with one official estimating commitments to cut about 500,000 barrels a day.
Mexico’s aging oil fields are in structural decline and it has shown no interest in further cutting its dwindling output.
Russian Energy Minister Aleksandr Novak is scheduled to chair the weekend meeting and has suggested a postponement is possible.
Robert McNally, president of energy-market consultancy The Rapidan Group, said oil producers may have grown complacent since the price of premium crude has catapulted to as high as $55 a barrel since OPEC announced the cuts on November 30.
“My sense is the fear factor is not strong enough to get countries to do anything but promise cuts that they never intend to make,” he told CNBC.
“The only time you get real collective cuts, including by non-OPEC, is when prevailing prices are at rock bottom lows.”
McNally said even Russia’s promised cuts look iffy, given the “litany of hedges, caveats, and conditions” Novak placed on delivering them.
In pledging the cuts, Novak said “Russia will gradually cut output in the first half of 2017 by up to 300,000 barrels per day, on a tight schedule as technical capabilities allow.” That statement gives Russia plenty of room to delay or fudge the cuts, analysts said.
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