By Bob Adelmann
Specifically, non-compliance among the cartel’s members rose to 25 percent in July, the highest since the agreement was inked in January. Among non-OPEC members who signed on to that agreement, non-compliance was at 33 percent in July.
Put another way, the cartel — both its members and its cooperating non-members — hoped to reduce crude oil production by enough to bring the world supply/demand equation into “balance.” That “balance” is supposed to happen when world crude supplies decline to a five-year average of around 2.7 billion barrels. At present, those supplies are at more than three billion, and climbing. Total OPEC production rose by nearly 500,000 barrels in July, instead of declining as per the January agreement.
Those most responsible for ignoring the agreement and going their own way include Algeria, Iraq, and the UAE (United Arab Emirates). Libya and Nigeria have been exempted from the agreement and are producing all they can.
Demand for crude is increasing, but not enough to absorb the result of the increased production by non-complying oil producers. Add in American frackers who continue to increase their rig counts, and the “balancing” equation becomes even more unpredictable.