OPEC won’t insist that all countries participating in a global oil-supply accord actively cut their production, accepting natural output declines from some nations, according to three oil officials familiar with the matter.
The Organization of Petroleum Exporting Countries has invited 14 non-members to finalize the distribution of a worldwide production cut announced on Nov. 30. While OPEC expects that Russia will deliberately cut about 300,000 barrels a day from current levels, part of a further 300,000-barrel reduction required of other nations can come from natural declines, the people said, asking not to be identified as the talks are private. So far, only Russia and Oman have agreed to cut from actual production, they said.
OPEC, responsible for about 40 percent of global oil supply, shook up world crude markets on Nov. 30 when it pledged to cut production by 1.2 million barrels a day to eliminate a persistent glut. The deal also hinged on cooperation from producers outside the group, who will need to jointly pare their output by 600,000 barrels a day. Countries will hold talks in Vienna on Dec. 10 to finalize the details.
“Natural declines in Mexico and other non-OPEC nations are already in the supply estimates of the agencies, so if OPEC would say these non-OPEC countries are cutting output, it would not tighten up the market,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich.
Projected Declines
Whether they make intentional cuts or not, the 14 nations invited by OPEC won’t add to the world oil surplus, according to the delegates. Non-OPEC nations consider the re-balancing of the global oil market to be in progress, they said.
Oil fields around the world are subject to a natural decline rate, as falling pressure at reservoirs results in a slower flow of crude to the surface.
Projected declines at 10 of the countries invited to the talks will amount to 293,000 barrels a day next year, or almost all of the reduction required of non-members excluding Russia, according to data from the International Energy Agency.
Azerbaijan, Kazakhstan, Oman and Mexico have said they will join OPEC and Russia for the discussions on Dec. 10. Invitations were also extended to Bolivia, Brunei, Colombia, Republic of Congo, Egypt, Trinidad & Tobago, Turkmenistan and Uzbekistan.
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