The success of the Opec and non-Opec production cut deal ultimately depends on the extent to which it erodes bloated inventories. That depends on compliance and the proof of that pudding will be in the eating.
If Shell were a knight, the Dragon natural gas field offshore Venezuela might be a quivering beast, Trinidad and Tobago the damsel in distress. But the setting for this medieval tale isn’t anywhere near Avalon. It’s Caracas, and there rules a capricious monarch on a three-legged throne.
Today’s Opec Monthly Oil Market Report indicates an impressive over-compliance with pledged cuts. The compilation of secondary source assessments of February production puts it at 31.96mn b/d, down by 140,000 b/d on January, and well below the target 32.68mn b/d. That’s a cut of 2.13mn b/d, compared with a planned cut of 1.17mn b/d.
One swallow doesn’t make a summer – but a self-administered pat on the back would be excusable.
It’s not even been four years.
In April 2013, then Saudi oil minister Ali Naimi said there was nothing to fear from shale oil production in the US. A few days later, Naimi adviser Ibrahim al-Muhanna told Gulf Co-operation Council oil ministers that any concerns they had that shale oil would lead to a huge increase in supply and a collapse in prices were “misplaced”.
Lower oil prices have made Gabon’s task of reversing a decline in production almost impossible. Investments have slowed and drilling has practically stopped. Since prices started spiralling down in June 2014, at least 2,500 jobs have been lost in the sector, according to the country’s oil workers union Onep.