Significant Decrease in OPEC and Russia's Oil Production in February

Reuters and Bloomberg have reported a significant drop in OPEC's oil production in February, noting that Russia has also reduced its output. OPEC and allied countries agreed on December 7, 2018, to cut their production by about 1.2 million barrels compared to October 2018 in response to falling oil prices. Two-thirds of this production cut is to be made by OPEC, while the remaining third is to be undertaken by allied countries led by Russia. Iran, Libya, and Venezuela are exempt from this agreement. The price of Brent oil is currently above $65, while it was around $53 at the end of last year. According to Reuters, OPEC's compliance with the daily production cut of 800,000 barrels in February has reached 101%, meaning it has cut more than its commitment. OPEC has reduced its daily production by 300,000 barrels compared to January, of which 250,000 barrels are from the 11 members of the organization committed to the production cut. Iran's oil production has decreased every month since the U.S. withdrawal from the JCPOA at the beginning of this summer. Reuters and Bloomberg have differing assessments of Iran's February production. Reuters states that Iran's production increased by 50,000 barrels last month, while Bloomberg's assessment indicates that Iran's production not only did not increase but also decreased by 90,000 barrels, reaching about 2.65 million barrels per day, the lowest level since 2013. OPEC and the International Energy Agency are expected to publish their assessment of OPEC members' oil production in two weeks, but recently, Reuters reported that Iran's oil exports in February are expected to be nearly double those in January. Reports from Reuters and Bloomberg indicate that Russia reduced its production by about 40,000 barrels in January and had a similar reduction last month. Recently, Alexander Novak, the Russian energy minister, announced that Russia's oil production in February decreased by 97,000 barrels compared to October, but Russia was committed to a reduction of 228,000 barrels and is still far from meeting that commitment. Russia claims that in sub-zero temperatures during winter, the technical ability to make changes in oil production facilities for reducing output is limited, but it seems the country is looking at the significant drop in production from Iran and Venezuela. Venezuela's production decreased by about 160,000 barrels last month due to U.S. sanctions, and further declines are expected. Venezuela's production was above 2.65 million barrels in 2015 but has now fallen to about 1 million barrels. Iran's production was about 3.8 million barrels before the U.S. withdrawal from the JCPOA and has now dropped to 2.65 million barrels. The U.S. is set to review the extension of exemptions for Iranian oil customers in May. It is still unclear whether the U.S. has plans to extend these exemptions, but the U.S. has stated its goal is to gradually reduce Iran's oil exports to zero. Frank Fannon, the U.S. State Department's energy representative, stated on March 1 that the Trump administration has no concerns about the level of oil supply in global markets following the re-imposition of unilateral sanctions against Iran. In November 2018, the U.S. granted exemptions to eight countries—China, India, South Korea, Japan, Taiwan, Turkey, Italy, and Greece—for six months to continue limited purchases of oil from Iran during that period.