Kazakh Energy Minister Nurlan Nogayev participated in the 19th Organization of Petroleum Exporting Countries’ (OPEC) Joint Ministerial Monitoring Committee (JMMC) meeting which was held via videoconference, during which the world’s oil producers agreed to extend production cuts through July, based on their original agreement in April.
In April, the 23-member group and non-OPEC oil-producing nations, including Kazakhstan and Russia, agreed to slash production by 9.7 million barrels a day in May and June, or ten percent of global oil output, the largest cut in the history, in an effort to stabilize the oil market and bring supply in line with the slump in demand caused by the coronavirus pandemic. Production cuts were designed to ease back to 7.7 million barrels per day between July to December, and 5.8 million barrels per day between January 2021 and April 2022.
During the meeting, Nogayev expressed Kazakhstan’s support for the agreement and acknowledged its potential positive impact on the global oil industry.
He also reassured the gathering that Kazakhstan will compensate for its oversupply in May by additional cuts in August and September. Under the original agreement, Kazakhstan committed to cutting its oil production by 390,000 barrels per day.
Oversupply in the first 12 days of the month amounted to 3.13 million barrels, said the minister, citing the industry’s inertia as a reason behind the country’s failure to comply fully with the cut.
He noted Kazakhstan’s conformity to the OPEC agreement reached 71 percent in May, while the overall conformity stands at 87 percent.
The curbing in oil production will amount to 23 percent in July, 21 percent in August and September, and 18 percent in October till December. Overall, Kazakhstan expects to produce 86 million tons in 2020, down by four percent from the initial forecast of 90 million tons. From January until May, Kazakhstan’s largest oil field Tengiz produced 12.4 million tons, while Kashagan oil and gas field produced 7.1 million tons and Karagachanak made 5.2 million tons.
During the meeting, which also reviewed monthly reports, recent developments in the global oil market, and immediate prospects for 2020 and 2021, the committee thanked Kazakhstan and Iraq for submitting their compensation schedules and stressed the importance of compliance to 100 percent conformity, as it is “not only fair and equitable but vital for the ongoing and timely rebalancing efforts and helping create sustainable oil market stability.”
Among the decisions taken during the meeting was also “subscribing to the concept of compensation by those countries who were unable to reach full conformity (100 percent) in May and June, to accommodate the underperformed volumes in July, August, and September, in addition to their already agreed production adjustment for such months,” said OPEC in a press release.
Brent crude oil currently trades at US$42.85 per barrel, as of June 23, a three-month high after it plunged below US$20 in April. Oil prices experienced an upward tick in recent weeks amid China’s economic rebound and the easing of lockdown measures in many countries.
“While the oil market remains fragile, the recent modest recovery in prices suggests that the first half of 2020 will end on a more optimistic note. New data shows that the slump in demand in the early part of the year was slightly less than expected, although still unprecedented,” said the International Energy Agency in its June Oil Market report.
The joint monitoring committee will meet every month to review the developments in the market and consider the level of cuts. The next meeting is scheduled for July 15.