OPEC has made a dramatic change in its oil policy

Surprisingly against the backdrop of contracted production cuts, OPEC's oil production rose last month. Nigeria and Saudi Arabia are the leading producers at present, with their total production increasing by 200,000 barrels to 29.99 million per day.

OPEC and OPEC + have agreed to cut production by 1.2 million per day in early 2019 as a result of the weakening global economy and the boom in US oil and shale gas, threatening the oil market from oversaturation.

However, their strategy at this stage is not working against the continuing decline of the global economy and the still unresolved trade war between the US and China. Brent is down nearly 20% from its peak in April and is currently trading around $ 59.

With Saudi Arabia increasing production, the Kingdom is still at its lowest level of production, with all OPEC + members trying to balance the oil market. Riyadh increased production by 50,000 barrels a day last month, at a time when local consumption is usually rising amid increased use of air conditioners.

The only major reductions in Saudi Arabia's output are to merely balance the actions of other OPEC members operating outside the agreed quota.

Nigeria, for example, has not honored any of its commitments to reduce production, on the contrary, in August it was increased by 60,000 barrels to 1.95 million a day. Russia is also showing signs of secession and is not fully complying with the quotas. The country was producing 11.294 million barrels per day, or 104,000 more.

An OPEC + meeting is set to take place on September 12 in Abu Dhabi to review the original agreement. The whole group, together with OPEC, will have a meeting in Vienna in December to review the 2020 strategy.

Source: Bloomberg Finance L.P.

Graphs: Used with permission of Bloomberg Finance L.P.

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