Opec Strives to Keep New Alliance Together

Opec's decision to implement a 1.5 million barrels per day reduction in output, announced in Cairo, is a crucial step in maintaining unity with non-Opec producers. The alliance, which has been fragile at times, now must work together to honor its commitments. Algerian oil minister Chakib Khelil acknowledged that winning non-Opec's cooperation has been challenging, but the new agreement will face its first test of compliance in the coming months.

Key Takeaways:

• Opec's new output reduction of 1.5 million barrels per day is effective from January 1 for six months, with a scheduled meeting on March 15 to assess market conditions and compliance.
• The alliance between Opec and non-Opec producers will be scrutinized closely, with Opec emphasizing the importance of adherence to pledged reductions by all producers.
• Opec's own compliance with its quotas has been a major issue, with the organization pumping 500,000-700,000 b/d over quota in November and December.
• Non-Opec producers face challenges in implementing their pledged reductions, particularly in defining their baselines due to differences in production levels.
• The Saudi Arabian oil minister, Ali Naimi, expressed enthusiasm for the alliance, stating that a fair price for producers is more important than questioning the reliability of other producers.
• Analysts believe that Opec is entitled to feel pleased with the producer alliance it has assembled, which is unprecedented in its scope and commitment.

Statistics:

• Opec's new output reduction: 1.5 million barrels per day
• Duration of the Opec deal: six months
• Opec's current production level: 500,000-700,000 b/d over quota
• Non-Opec supply: expected to drop by less than 500,000 b/d
• Global demand: expected to fall 1 million-1.5 million b/d between the first and second quarters

Sources:

• "Opec Strives to Keep New Alliance Together" (name not mentioned)
• OD (Oil Daily, December 28, p1)