Opec's members are to start raising oil output again, officially aiming to achieve 100% compliance with its cuts and, in doing so, imply the addition of up to 700,000 barrels a day of supply to the market.
It marks the beginning of the end of Opec's cuts strategy that began in January 2017, eliminating a global stock excess than lifted prices by about 50%.
Following the weekend announcement that participants at the 174th meeting of Opec conference in Vienna had collectively agreed to increase production, there was immediate reaction.
GlobalData analyst Joseph Gatdula said that the historic Opec agreement from late 2016 to curb production had recently exceeded targeted compliance by 152%.
"Today's pledge to meet 100% compliance is an attempt by Opec to address concerns of an undersupply scenario in which oil price increases to levels that would hinder global growth. The magnitude of production increase would decrease the undersupply, however decline rates at existing fields, and slower than expected growth in US production should leave room for more production increases.
‘‘GlobalData estimates Opec production should increase by a minimum of 600,000 barrels per day to match targeted cuts," Gatdula said.
Gatdula added that this followed earlier reports of a one million barrel production increase which was strongly opposed by Iran.
"In consultation with Saudi Arabia a compromise was agreed with partners including Iran whose ability to increase production would be curtailed by the recently imposed US sanctions. OPEC production levels would be reassessed again at the end of 2018.
"The inability of certain OPEC members to raise production will undoubtedly mean the bulk of production increases will be met by the largest producers, though the distribution of increases between members remains unclear," Gatdula said.
The communiqué following the meeting did not stipulate a volume of oil supply, only that the group would "strive to adhere to the overall conformity level of Opec-12, down to 100%, as of 1 July 2018" until the Declaration of Cooperation with non-Opec countries expires at the end of 2018.
Petroleum-economist.com reported that Opec would not say which countries would add supply to the market. "You do the maths," said United Arab Emirates Energy Minister and current Opec president Suhail Mohamed al-Mazrouei.
Mazrouei added only that targeting the 100% compliance rate would be a "collective effort" to bring the cuts back down to the agreed target of 1.18 million barrels per day (the cuts in May amounted to 1.86 million barrels per day).
"The actual production of each country is something unilaterally they can decide," Mazrouei said.