Oil overproduction: OPEC+ asked to extend compensation period

Oil overproduction: OPEC+ asked to extend compensation period

While potentially discussing altered "compensation schedules" for the laggards in compliance - of which Iraq is the biggest, the OPEC+ panel meetings this week are not expected to recommend any changes to the current production cut deal, despite the fact that oil prices slumped in the past two weeks over mounting concerns that global oil demand recovery has stalled.

Since he became Saudi oil minister a year ago, Prince Abdulaziz has applied intense pressure to any country cheating on its quota.

"Using tactics to over-produce and hide non-compliance have been tried many times in the past, and always end in failure", Prince Abdulaziz said at the opening session of the OPEC+ committee that monitors the output cuts.

Saudi Energy Minister Prince Abdulaziz bin Salman's warning on 17 September to market speculators betting against the OPEC+ alliance to "make my day" did just that, as Brent oil prices posted their largest 3-day advance since May.

"Anyone who thinks they will get a word from me on what we will do next, is absolutely living in a La La Land".

The recent reports from OPEC and IEA also noted a slowdown in oil demand recovery.

Although more countries around the world are gradually moving out of lockdown, crude consumption has not returned to pre-confinement levels, which were already relatively low.

The committee said in a statement that it reviewed the monthly report prepared by its Joint Technical Committee and developments in the global oil market since its last meeting on August 19.

"Nevertheless, signs of an increase in COVID-19 infections have appeared in some countries, leading to some worries regarding its impact on economic recovery and oil demand".

In response, the Organization of Petroleum Exporting Countries and its allies will be "proactive and preemptive", according to the communique from the Joint Ministerial Monitoring Committee, which oversees the cartel's production cuts.

The cuts were then to be gradually eased from July, to 7.7 million bpd until December. USA oil futures CLc1 rose 14 cents to settle at $41.11 a barrel, and gained 10.1% for the week.

The panel on Thursday could extend the period in which non-compliant members should compensate for their overproduction, other sources told Reuters earlier this week.

Brent and WTI crude held on to the two percent jump in market prices seen at the start of the meeting. He introduced the notion of compensation cuts as a new means of ensuring compliance. We hope that we have succeeded by giving you the full details and information.

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