OPEC President Edmund Daukoru conceded in a newspaper interview Tuesday that some members of the oil producer group weren't complying with a 4% cut in its crude production, reinforcing the skepticism among oil market participants about the group's ability to show discipline in implementing its output policy.
In an interview with Nigeria's This Day newspaper, Daukoru said those in OPEC "tried our best to comply" with a decision Oct. 20 to cut 1.2 million barrels a day of output from among 10 of its 11 members. Iraq is excluded from having to make production cuts.
Despite the concerns over compliance, Daukoru reiterated that the Organization of Petroleum Exporting Countries may agree to further output cuts at the group's next meeting in the Nigerian capital Abuja on Dec. 14.
"Definitely we will consider further cuts in OPEC supply output at the December meeting," Daukoru told This Day. "If you don't sell your commodity, the best thing to do is to keep it...in the ground rather than give it to someone else to stock up and use it to drive your price down."
The move to shore up oil prices at a time of swelling crude stocks across the world was intended to cut OPEC-10's actual output to some 26.3 million barrels a day from 27.5 million barrels a day, a 4.3% decrease from OPEC's September output.
In the interview, given after OPEC officials visited the Nigerian capital in preparation for the Dec. 14 policy talks, Daukoru said, "There is always some degree of non-compliance," because of differing circumstances among members. "I am looking forward to some reasonable level of compliance. I have no doubt there is going to be a cut in supply. We really need to make a statement to the market."
Last week, reports from two leading tanker trackers differed in their assessment of the size of OPEC shipments in November.
Petrologistics said preliminary estimates for November showed OPEC shipments are expected to fall by 1.1 million b/d from October, roughly in line with OPEC's commitment.
But U.K.-based tanker tracker and oil consultancy Oil Movements, which forecasts exports based on spot and term chartering of crude oil from OPEC's 11 members, said OPEC exports were heading higher in the four weeks to Dec. 2.
"We will not have a really solid handle on OPEC's success or its lack thereof (in implementing the cut), until around Dec. 11, which is a Monday," said Peter Beutel of Cameron Hanover. "OPEC meets that Thursday."
Given the indications that OPEC has failed to fully adhere to the recent cut, if it does decide to further reduce supply in December the market is likely to respond with even more skepticism.
The International Energy Agency recently highlighted the highest oil inventories build in 15 years among the wealthiest, industrialized countries. Offsetting that has been a recent run of withdrawals of gasoline and distillates in the U.S., muddying the outlook for stockpiles ahead of winter.