DUBAI / BAGHDAD / LONDON (Reuters) – Gulf producers of OPEC, the United Arab Emirates and Kuwait, as well as Iraq, question whether they should postpone existing cuts in oil supply until in 2021, as they struggle to stick to the agreed cuts, OPEC and industry sources said.
Their hesitation raises the possibility of revisiting production targets when the Organization of the Petroleum Exporting Countries meets in November to decide on its production policy and could create new friction within the OPEC + group which includes allies, complicating negotiations. efforts to rebalance the market in a context of weak global demand.
The United Arab Emirates and Kuwait have traditionally supported Riyadh’s position, but both countries are feeling the heat of strict oil policies in 2021 as they believe the scale of their production cuts is too large to support, the two countries said. sources.
Saudi Arabia, the de facto leader of OPEC, and non-OPEC Russia support continued current cuts in oil production of around 7.7 million barrels per day next year, rather than to ease them by 2 million bpd from the January pact, OPEC sources said.
“Countries are suffocated by these cuts, it is very difficult to continue them next year too,” said an OPEC source.
The UAE finds it difficult to continue to bear the burden of the big cuts because of its deals with international oil companies and the base production used for the cuts is too low relative to production capacity, the UAE said. OPEC and industry sources informed on the matter.
Other sources said the UAE and Kuwait have argued during recent OPEC + talks that they are not concerned about Libya returning with a sustained increase in production in the short term. , which will make it easier for other OPEC members to increase production as planned.
According to OPEC data, the UAE is cutting about 33% of its production potential, pumping 2.59 million b / d, up from around 3.9 million b / d in April before the deal.
The UAE overproduced in August but pledged to offset the rise by reducing its oil supply in the coming months.
Kuwait’s production cap is 2.297 million b / d after increasing production to around 3.1 million b / d before the deal, which means it is cutting its production capacity by around 26% , according to the data.
Iraq, OPEC’s second-largest producer, which is due to cut around 850,000 bpd, has spoken of being exempt from the cuts next year.
“Iraq will remain committed to the OPEC + reduction agreement and we will continue to deliver on our commitment, not only to reduce production, but also to make up for the missing months until the end of the year,” said a senior Iraqi oil industry official who attends OPEC meetings.
“But, and here we have a big but, when OPEC meets again to discuss the 2021 plans, it will be difficult for Iraq to continue cutting production and exports with the same share agreed in 2020 because we are suffering from a financial crisis that threatens possible collapse. the Iraqi economy, ”the official said.
“All OPEC members must understand the plight of Iraq … when it comes to discussing a new agreement to extend cuts.
Iraq did not meet its production targets, but its compliance improved as it agreed to compensate for previous overproduction by December.
“In order for the rollover to work, I think the benchmarks and quotas need to be re-examined … when the object of the game is to produce and maximize your earnings,” said a source from a producing country of the OPEC.
Edited by Marguerita Choy