Rather than advocating for a deeper overall cut, OPEC’s largest producer and de facto leader Saudi Arabia will be pressuring non-compliant cartel members to fall in line with their quotas, but will nevertheless seek higher oil prices ahead of the listing of Aramco expected for December.
This would remind potential investors in the Kingdom’s oil giant that Saudi Arabia retains its influence over OPEC and has the final word on the cartels policy, The Wall Street Journal reported on Wednesday, citing sources with knowledge of the Saudi plan ahead of the OPEC meeting in early December.
Saudi Arabia is on a mission to get all overproducing countries in OPEC, and in the larger OPEC+ group such as Kazakhstan, to respect their production quotas under the deal.
If all overproducers in the OPEC+ pact were to stick to their respective targets, the group will deliver an effective 500,000 bpd cut in oil production, Saudi oil advisors told the WSJ.
Saudi Arabia, which has repeatedly said that it will do ‘whatever it takes’ to rebalance the market, needs high oil prices to ensure that Aramco’s IPO—the world’s largest listing ever—will be a success after years of delays.
Saudi officials have been telling fellow OPEC members that a deeper cut could be discussed at the December meeting, according to The Journal’s sources. The largest OPEC producer, however, would rather not insist aggressively on an official deeper-cut target so that it will not be left to make the most of the new cuts again.
“It would be an admission of weakness,” the Saudi oil adviser told The Journal.Related: Oil Majors Attack The Democrat’s Fracking Ban
The biggest non-compliant OPEC producers, Nigeria and Iraq, vowed in September to fall in line with their quotas. They saw their production drop in October, according to the Reuters monthly survey, but they were still producing above their quotas, even after Nigeria received a higher cap from OPEC.
Saudi Arabia, for its part, continues to overcomply with its share of the cuts, to the tune of around 400,000 bpd. The Saudi cap under the OPEC+ deal is 10.311 million bpd, while the Kingdom pumped 9.9 million bpd in October, the Reuters survey found.
By Tsvetana Paraskova for Oilprice.com