NUR-SULTAN – Kazakhstan reaffirmed its commitment to the Organization of Petroleum Exporting Countries agreement during the July 15 meeting of the OPEC Joint Ministerial Monitoring Committee (JMMC) meeting that meets every month to review the developments in the global oil market and consider the level of cuts, said the Kazakh Energy Ministry in a press statement.
The oil-producing nations noted the positive impact of the agreement on the global oil industry.
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. Under the original agreement, Kazakhstan committed to cutting its oil production by 390,000 barrels per day.
The 9.7 million barrels cuts were expected to end in June but were extended until July 31 at the committee’s previous meeting in early June.
Production cuts will taper to 7.7 million barrels per day between August to December and to 5.8 million barrels per day between January 2021 and April 2022.
In May, Kazakhstan reported an oversupply in the first 12 days of the month which amounted to 3.13 million barrels and committed to compensating for it by imposing additional cuts in August and September.
The Kazakh government also adopted a decree on June 23 that envisions temporary restrictions on the use of subsurface sites for exploration, production operations, and hydrocarbon production to meet the needs of the domestic market as well as to ensure fair distribution of obligations to reduce oil production for large projects and old fields that have reached the stage of the natural decline in production.
According to the Kazakh Energy Ministry, 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.
During the meeting, the committee stressed the importance of achieving 100 percent compliance, as it is “not only fair but vital for the ongoing rebalancing efforts and to help deliver long term oil market stability.”
While overall compliance stood at 87 percent in May, the committee noted the “significant performance” in June with the overall conformity level for participating OPEC and non-OPEC countries reaching 107 percent.
“Oil demand has bounced back from the lows that saw daily drops of more than 20 million barrels a day in April, but it is still expected to witness an annual drop of 8.9 million barrels a day for the whole of 2020. Given the considerable uncertainties, the expected rebound in 2021 will be short of covering the lost demand this year and will not reach pre-crisis levels of 100 million barrels a day soon,” said OPEC Secretary-General Mohammad Sanusi Barkindo.
The next committee meeting is slated for Aug. 18.