Saudi Arabia urges OPEC+ members to fulfill oil production cut commitments

Prince Abdul Aziz said producers who have failed to make the agreement will have to make up the cuts in July, August and September. (SPA/File)
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Updated 09 June 2020

Saudi Arabia urges OPEC+ members to fulfill oil production cut commitments

  • OPEC, Russia and other producers agreed on Saturday to extend production cuts of 9.6 million barrels per day
  • Prince Abdul Aziz: 'There is no room for lack of conformity in the agreement'

DUBAI: Saudi Energy Minister Prince Abdul Aziz bin Salman on Monday stressed the Kingdom’s determination to rebalance global oil markets in the wake of the successful weekend meeting of members of the OPEC+ alliance.

“First and foremost, our purpose is to ensure the stability of the markets,” he told journalists at the first-ever virtual press conference of the Organization of the Petroleum Exporting Countries (OPEC) and its allies led by Russia.

But the prince warned that the progress already achieved in stabilizing oil supply and prices depended on all members of OPEC+ fulfilling their commitments to the cuts of 9.6 million barrels per day (bpd) agreed upon last April and extended for another month by the weekend meeting.

“There is no room for lack of conformity in the agreement. Producers who have failed to make the agreement will have to make up the cuts in July, August, and September. There is no stomach for laxity,” he added.

Iraq and Nigeria were the two main culprits in noncompliance, with Kazakhstan and Angola also selling more oil than they had pledged.

Prince Abdul Aziz said that progress toward meeting the new output levels would be strictly monitored by monthly sessions of OPEC+ energy ministers beginning in 10 days.

“I have no doubt Iraq will discharge its commitment to the letter. OPEC+ is about self-imposed and disciplined decision-making,” he said.

The Saudi minister said he would like to instill some of the techniques of central bank management into the monthly meetings of the Joint Ministerial Monitoring Committee, which will oversee compliance.

“Central bankers did a great job in the global financial crisis, and even now,” he added, singling out former US Federal Reserve chairman Alan Greenspan as “my hero.”

Saudi Arabia will halt the 1 million bpd in extra voluntary cuts it announced in May. “The voluntary cuts served their purpose and we are moving on,” the prince said.

Russian Energy Minister Alexander Novak, also present during the hour-long question and answer session with around 100 international journalists, said that global oil markets needed to find more balance. “Producers and consumers want recovery as fast as possible. The decision to extend the cuts was dictated by the need to see us through the most delicate period of recovery,” he added.

Novak agreed that full compliance was crucial to the OPEC+ deal. “The success of our efforts rest on all countries doing their part,” he said.

Despite the weekend deal and the upbeat tone of the OPEC+ event, global oil markets shed some of the gains of recent weeks, trading at $40.88 per barrel, down nearly 3 percent, by the close of European trading.

American investment bank Morgan Stanley warned of the danger of prices rising too fast, causing US shale production to pick up again.

 


Oil giants’ production cuts come to 1m bpd as they post massive write-downs

Updated 10 August 2020

Oil giants’ production cuts come to 1m bpd as they post massive write-downs

  • Crude output worldwide dropped sharply after the market crashed in April

LONDON: The world’s five largest oil companies collectively cut the value of their assets by nearly $50 billion in the second quarter, and slashed production rates as the coronavirus pandemic caused a drastic fall in fuel prices and demand.

The dramatic reductions in asset valuations and decline in output show the depth of the pain in the second quarter. Fuel demand at one point was down by more than 30 percent worldwide.

Several executives said they took massive write-downs because they expect demand to remain impaired for several more quarters as people travel less and use less fuel due to the ongoing global pandemic.

Of those five companies, only Exxon Mobil did not book sizeable impairments. But an ongoing reevaluation of its plans could lead to a “significant portion” of its assets being impaired, it reported, and signal the elimination of 20 percent or 4.4 billion barrels of its oil and gas reserves.

By contrast, BP took a $17 billion hit. It said it plans to recenter its spending in coming years around renewables and less on oil and natural gas.

Weak demand means oil producers must revisit business plans, said Lee Maginniss, managing director at consultants Alarez & Marsal. He said the goal should be to pump only what generates cash in excess of overhead costs.

“It’s low-cost production mode through the end of 2021 for sure, and to 2022 to the extent there are new development plans being contemplated,” Maginniss said.

London-based BP has previously said it plans to cut its overall output by roughly 1 million barrels of oil equivalent (BOEPD) by the end of 2030 from its current 3.6 million BOEPD.

Of the five, Exxon is the largest producer, with daily output of 3.64 million BOEPD, but its production dropped 408,000 BOEPD between the first and second quarters. The five majors, which include Chevron Corp, Royal Dutch Shell and Total SA, also cut capital expenditures by a combined $25 billion between the quarters.

Crude output worldwide dropped sharply after the market crashed in April. The Organization of the Petroleum Exporting Countries agreed to cut output by nearly 10 million barrels a day to balance out supply and demand in the market.