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Non-OPEC 14 Should Reach A 0.6 mb/d “Reduction”, But It Isn’t Likely To Move Oil Prices

By Dan Tsubouchi

WTI drifted down this week, closing today below $50 ($49.90) today.  The key items this week were Bloomberg’s reporting that OPEC Nov oil production was up 0.2 mb/d to 34.16 mb/d and concerns that this Saturday’s Vienna meeting with Non-OPEC 14 isn’t going to result in a 0.6 mb/d reduction.  OPEC’s Nov 30 deal had driven WTI from $45.33 to over $52 by Friday.

The pull back in oil prices back to $50 makes sense with the higher OPEC oil production that makes it harder to get to the 32.5 mib/d target and increases the risk of cheating.  Bloomberg estimated Nov oil production increases were Angola +0.17 mb/d to 1.69 mb/d and Algeria +0.03 mb/d to 1.16 mb/d.  In theory, these shouldn’t be that big a deal as both countries agreed to reduce oil production levels. But it raises the risk of cheating as the Nov 30 deal agreement committed Algeria to get to 1.039 mb/d and Angola to 1.664 mb/d. Libya and Nigeria were excluded from any commitment to reduce production.  Bloomberg estimated that in Nov, Libya was +0.06 mb/d to 0.58 mb/d and Nigeria was +0.08 mb/d to 1.68 mb/d, and their increases make it tougher to get to the overall target.

OPEC and the Non-OPEC 14 are meeting on Saturday in Vienna.  This is the meeting of the “key” 14 Non-OPEC countries to whom OPEC is looking for a “reduction” of 0.6 mb/d.  The Non-OPEC 14 are Azerbaijan, Bahrain, Bolivia, Brunei, Colombia, Congo, Egypt, Kazakhstan, Mexico, Oman, Russia, Trinidad, Turkmenistan and Uzbekistan.  OPEC’s Nov 30 announcement said “This agreement has been reached following extensive consultations and understanding reached with key non-OPEC countries, including the Russian Federation that they contribute by a reduction of 600 tb/d production”.   OPEC made its Nov 30 statement based on “extensive” discussions with these Non-OPEC countries.  The invited Non-OPEC countries do not include more significant Non-OPEC oil producers like the US, Canada, China and Brazil weren’t included or prepared to discuss reductions.