OPEC Defers Decision on Oil Output Reduction

The Organization of the Petroleum Exporting Countries and its oil-producing allies put off any talk of further output reductions at a technical meeting Thursday, despite growing evidence of a mounting global supply glut and slowing demand growth for crude.The group instead stressed the importance of adherence to previously agreed output curbs, in an attempt to coordinate what some delegates to the OPEC called “hidden cuts.”

“It is clear OPEC is getting more serious about compliance,” said a delegate from the Persian Gulf region. “It is effectively a hidden cut, because if countries like Nigeria and Iraq do comply with the voluntary cuts, we will end up with less barrels in the market.” OPEC and its allies including Russia agreed in June to extend crude output cuts into their fourth year. At this week’s gathering in Abu Dhabi, the 14-nation cartel and a group of 10 allied countries led by Russia called on all producers participating in output reductions to “intensify their efforts in pursuit of full and timely conformity.” OPEC and its allies could deliver an output reduction of around 400,000 barrels a day by improving compliance, delegates familiar with the discussions said. Ministers were circumspect about the threat a potential flood of Iranian oil back onto the market posed to crude prices. The exit of hawkish U.S. National Security Advisor John Bolton has sparked speculation that President Trump is considering renewed negotiations with Tehran.

Iranian inventories are near all-time highs and an easing in sanctions could release as much as 700,000 barrels of Iranian oil a day into global markets, according to Royal Bank of Canada Capital Markets. Efforts to bring OPEC nations into line with the cartel’s “Declaration of Compliance” come as sagging global economic growth and weakening oil demand has weighed on energy prices. The price of Brent crude oil, the global benchmark, has dropped 24% in the past 12 months. In its closely watched monthly market report Wednesday, OPEC cut its oil demand growth forecast for 2019 for the second month in a row. The OPEC meeting took place ahead of an imminent initial public offering of shares in Saudi Arabian Oil Co., known as Aramco. While no official date has been announced, Saudi and Aramco officials have this week suggested that a two-stage domestic IPO of Aramco will come “very soon.” That float has put Saudi Arabia under particular pressure to boost crude prices to a level that will achieve Crown Prince

Mohammed bin Salman

’s hoped-for $2 trillion valuation.

What does the road to an IPO look like for the world’s most profitable company? After repeated delays, Saudi Aramco has revived plans for what would be the biggest-ever IPO. But hurdles remain for the state-owned energy company. Photo illustration: Adele Morgan

OPEC offered no signals of possible production cuts to come from its next full meeting in December. However, delegates from Nigeria and Iraq—countries that have repeatedly flouted OPEC’s cuts—announced efforts to achieve greater conformity at a press conference led by new Saudi energy minister

Prince Abdulaziz bin Salman.

Nigeria will achieve full compliance by October, the country’s oil minister, Timipre Sylva, said. Iraq’s oil minister,

Thamir Ghadhban,

announced that Iraqi crude production would be cut by 175,000 barrels a day. “Everyone is fully aware the situation in the market may require a deeper cut and how difficult it would be to get everyone to agree on that,” said another Gulf-region delegate. “So now it is a matter of getting tougher on those who are not complying.” Write to Summer Said at summer.said@wsj.com, David Hodari at David.Hodari@dowjones.com and Benoit Faucon at benoit.faucon@wsj.com

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