OPEC members so far show no sign of meeting their pledge to stop 1.5 million barrels per day of over-production, with March crude allocations to key customers unchanged from those for February, traders said on Friday.
On Friday trade sources named Iran as the latest OPEC member to have kept supplies steady, despite the cartel’s announcement in Algiers on Tuesday that it would eliminate production above OPEC’s official output ceiling with immediate effect.
Earlier this week, customers of Saudi Arabia in Europe and Asia said they expected March supplies to be unchanged from February levels, while oil traders said it would be very difficult for Nigeria to reduce March oil availability because most of it had already been sold.
Sales from the United Arab Emirates to its main customers in Asia also were unchanged.
“I haven’t had any communication which says production will be coming down,” said one trading source at a Nigerian producer.
Oil producers typically must give customers about 20 days notice of monthly supplies. March volumes are now being set.
Tuesday’s OPEC meeting in Algiers attempted to pre-empt a possible price collapse in the second quarter with the announcement it would cut official quotas by one million bpd to 23.5 million bpd effective from April 1 in addition to the promised action to stop over-production.
However, the cartel meets again on March 31 and some in OPEC have not ruled out reversing the April output cut if prices stay high.
“If the price is between $27 and $29 by the March meeting we may not activate the cuts,” Nigeria’s Presidential Oil Adviser Edmund Daukoru told reporters on Thursday. “If we have to cut we will cut but if we don’t have to cut, to me that is the best.”
UAE Oil Minister Obaid al-Nasseri also said the decision could be overturned if prices stayed high.
Industry sources in Europe and Asia said oil majors had seen no evidence of a reduction in Saudi supply for next month compared with February volumes, although some said they expected supplies would be reduced in April.
OPEC’s biggest producer Saudi Arabia accounted for about one-third of the estimated production in excess of official limits, according to International Energy Agency (IEA) data released on Wednesday.
Analysts said that as long as oil prices remained high, the temptation was for OPEC members to over-produce, though a sharp fall in prices could prompt action.
“I don’t think it was empty rhetoric,” said Deutsche Bank’s Adam Sieminski of this week’s OPEC decision. “It’s a question of the price. When the price goes down, that’s when they have to act.”
“At these prices there’s very little incentive to cut,” said Nauman Barakat of brokers Refco in New York.
Prices have held firm this year, with U.S. light sweet crude averaging more than $34, buoyed by low oil stocks and increased activity by speculative investment funds.
The high prices, which threaten to damage economic growth, have made it politically difficult for the Organization of the Petroleum Exporting Countries to implement an output cut despite their concerns of a looming supply surplus in the second quarter of this year when demand is expected to see a seasonal decline.
OPEC’s reference crude oil price fell slightly to $28.96 a barrel on Thursday from $29.13 on Wednesday, the OPEC news agency said on Friday.
The level was still above the top of the cartel’s favored $22-$28 price range.
