No changes for OPEC, while Russia oil production surging

OPEC will review oil production targets in December, but they do not foresee any changes in the current production target of 24.84m bpd. Meanwhile Russia, the world’s biggest oil exporter, set a fourth consecutive monthly output record in November, averaging 10.07m bpd. Russia, which is not an OPEC member, will send a minister to attend OPEC’s meeting in Luanda as an observer, but Russia has shown little interest in ratcheting back its oil production in line with OPEC targets.

OPEC has been noticeably quiet about its upcoming agenda thus far, but the global oversupply of crude and the middle distillate overhang, as well the tentative economic recovery that has not pushed the demand profile higher, are likely to be key issues.

Talks behind the scenes will also likely address overproduction by member states, which has been creeping higher, alongside prices, for months. The question is “at what level will OPEC be prepared to ratchet back ‘over quota’ production?”

OPEC’s compliance in the first six months of the production cuts was remarkably tight, given its historical compliance levels. But now OPEC appears either unwilling or powerless to reel in the surplus as long as prices remain at $65 to $80. OPEC also faces a bigger issue of non-OPEC production which, unlike in the past, is a significant disincentive for member compliance.

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