Opec+ presses for compliance with oil cuts

Moscow

GLOBAL oil demand should recover to pre-pandemic levels as soon as the fourth quarter of 2020, the Saudi Energy minister said on Wednesday while urging Opec members and allies to boost compliance with oil output cuts aimed at supporting prices.

The comments came as Opec oil producers and allies such as Russia, a grouping dubbed Opec+, began a meeting on Wednesday to review the compliance levels.

"Based on the average projections of various institutions, including Opec, EIA and the IEA, it is estimated that the world will reach about 97 per cent of pre-pandemic oil demand during the fourth quarter - which is a big recovery from the huge falls in April and May," said Prince Abdulaziz bin Salman.

A draft Opec+ statement, seen by Reuters, said a second prolonged wave of the pandemic was a major risk for the oil market recovery.

Opec+ sources have said the group was unlikely to change on Wednesday its output policy, which currently calls for reducing output by 7.7 million barrels per day (bpd) versus a record high 9.7 million bpd up until this month.

Other sources said the virtual meeting, which started after 1400 GMT, would look in particular at compliance by countries such as Iraq, Nigeria, Angola and Kazakhstan.

They have made a smaller share of their reduction than members such as Saudi Arabia and are now due to compensate for higher output in May-June by producing less in July-September.

"It is very important to maintain full conformity," said Russian Energy Minister Alexander Novak, who had tested positive for coronavirus and joined the virtual meeting from home.

"We should endeavour to put this temporary compensation regime behind us, by clearing all the past over-production by end of September," said Prince Abdulaziz.

The draft statement said all compensation plans shall be submitted before the end of August.

Overall compliance with the deal reached 95-97 per cent in July, the draft report said - a high figure by Opec standards.

In July, Saudi Arabia was pumping below its target and Iraq and Nigeria, while lagging the Gulf Opec members on compliance, were pumping less than in previous months.

Oil prices eased on Wednesday on concerns US fuel demand will face a slow recovery amid stalled talks on an economic stimulus package and despite support from a bigger-than-expected drawdown in US crude stocks.

Brent crude futures were down 44 cents, or 1 per cent, to US$45.02 a barrel at 1230 GMT, but still not far off a five-month high above US$46 a barrel reached earlier in August.

US West Texas Intermediate (WTI) crude futures were down 41 cents, or 1 per cent, at US$42.48 a barrel. REUTERS