The Organization of Petroleum Exporting Countries said on December 17th that it would reduce its output target to 24.845 million barrels a day, a 4.2 million b/d cut from September production. At the time there was wide-spread skepticism among oil traders that OPEC would ever unite sufficiently to carry out a program of major production cuts.
In the last two weeks, nearly every member of OPEC has announced its intentions to comply with their production targets. In several cases OPEC members have released details of which fields and companies will be cutting production. Senior OPEC officials have said that it is likely that the cartel will make the promised cuts. Even the National Iranian Oil Company, which normally is very reticent to talk about its production, has announced that it will be cutting supplies under some long-term contracts by 14 percent. Venezuela will be reducing its shipments to two US refineries and said it will be cutting production by 189,000 b/d. Caracas has already made cuts of 46,000 b/d and 129,000 b/d as agreed in the September and October meetings so that the total cut since September will be 364,000 b/d.
The Saudis are now saying that they will cut their February production to 7.7 million b/d which is 300,000 b/d below quota. Refiners in Asia say they have been notified by the Saudis that their shipments in February will be 10 percent lower than called for in long-term contracts. Nigeria announced that it plans to export 1.66 million b/d in February down 12 percent from December. The situation there is always confused because of delays and disruptions caused by insurgent attacks, but it appears that Nigeria will be cutting 320,000 b/d from September levels. In Ecuador, the government has announced that the Italian and French oil companies operating there will be cutting production 40,000 b/d in line with the new target.
If all these announcements are to be believed, there would seem to be widespread compliance with the cuts from the September, October and December meetings so that production in a next two or three months will actually be 4 million b/d or more lower than last fall. At that point oil prices will either be moving back up or world demand has fallen much further than is generally acknowledged.