The Organisation of Petroleum Exporting Countries (OPEC) and its non-OPEC allies (collectively OPEC+) decided to deepen cuts on production by 500,000 barrels per day (bpd) as of 1 January 2020, in anticipation of oversupply from non-OPEC producers in early 2020. This brings the total official cuts to 1.7mbpd, with already existing cuts set at 1.2mbpd.
However, Saudi Arabia has already been cutting 400,000bpd more than it agreed to, and will continue to do so, according to Saudi Energy Minister Prince Abdulaziz bin Salman, meaning cuts will realistically reach up to 2.1mbpd.
In a press release, OPEC noted that its members considered oil market developments and the industry's outlook for 2020. The global economy is still forecast to grow at 3%, and oil demand is expected to grow by 1.1mmbpd. However, it also noted that expectations for non-OPEC supply was recently revised downwards.
Of the additional 500,000bpd cuts, Reuters reports that OPEC will take 372,000bpd of cuts and non-OPEC will be responsible for the remaining 131,000bpd cut.
Compliance has been a key issue for OPEC+, with nations including Iraq and Nigeria regularly producing above quota, leaving Saudi Arabia to shoulder additional cuts.
"It is important to stress [...] that individual conformity levels need to be met," said Manuel Salvador Quevedo Fernandez, Venezuela’s People's Minister of Petroleum and President of the OPEC Conference 2019. "Cohesion and its practical demonstration are the true keys to our success, be it conformity levels or more broadly acting in unison."