OPEC’s Joint Ministerial Monitoring Committee (JMMC) recent meeting suggests that the conformity level to the production cut agreement has averaged 120.0% since the start of the year, touching a recent high of 168.0% in Apr-1 9. No doubt, the inadvertent production shortfall in some member states had edged the compliance level higher. Worthy of mention is the freefall in Venezuela’s production which fell 1 8.6%q/q in Q1-1 9 to 9.7mbpd.
Reports from the IEA even showed that production in the country touched its lowest level since 2003 in Apr1 9. As the cartel prepares to convene in Vienna for its
meeting in Jun-1 9, we reckon the cloud of the uncertainty that arises from recent geopolitical jitters as they aim to deliver their mandate of stabilizing the oil market. On the supply side, beyond the reluctance of the US administration to renew waivers of Iranian oil importers, the recent attack on the tanker ships near the Strait of Hurmuz has heightened the fears of supply disruption. Meanwhile, the escalation of the US-China trade negotiations and its potential attendant negative impact on global growth weigh.
Overall, while the cartel has signalled its inventory targeting approach, we reckon that they may adopt a wait-and-see approach and maintain the status quo on the current agreement.
United Capital Research