The 10 Organization of the Petroleum Exporting Countries (OPEC) members moved closer to full compliance with the landmark production cut agreement signed late last year, as output in the month fell from January levels to average 32.03 million barrels per day, according to an S&P Global Platts survey of analysts released Monday. In all, taking an average of January and February production, the 10 members obligated to reduce output under the deal have achieved 98.5% of their total combined cuts, according to the survey, up from 91% in January.

“A Saudi-led OPEC is showing the market it is serious in making the agreement stick. While it remains an open question whether OPEC will achieve its goal of drawing down stocks sufficiently to re-balance the market, OPEC is fulfilling its commitment, certainly in contrast to non-OPEC partners who are some ways from cutting down to their agreed levels,” says Herman Wang, OPEC Specialist, S&P Global Platts.

Saudi Arabia continued to show the strongest output discipline, with its February production averaging 9.85 million barrels per day (b/d), the survey found, below its allocation under the deal of 10.06 million b/d and its lowest output since February 2015, according to the survey archives. The January and February combined average output of 9.92 million b/d was 140,000 b/d below Saudi Arabia’s deal quota.

The kingdom’s over compliance, along with Angola’s, is helping compensate for the overproduction others within OPEC, notably Iraq, Venezuela, and the United Arab Emirates (UAE), which have not cut down to their allocations under the deal. Iraq remains 91,000 b/d above its quota despite lowering its February output, Venezuela is 43,000 b/d above, and the UAE is 42,000 b/d above. Saudi Arabia and Angola’s output reductions also have mostly offset for increases by exempt Libya and Nigeria since the deal began on January 1.

Non-OPEC compliance continues to lag OPEC’s adherence to the deal. Russia, for instance, which committed to a 300,000-b/d cut from October levels, only reduced output by 121,300 b/d in February, according to its energy ministry. Russian officials have insisted, however, that their production cuts would be phased in and completely achieved by May.

Libya’s January and February average is 140,000 b/d above the agreement’s reference October levels, while Nigeria is producing 44,000 b/d above the reference level. Iran, which is allowed to boost production to 3.80 million b/d under the deal as it recovers from western sanctions lifted in January 2016, had February production of 3.75 million b/d, a 30,000 b/d increase from January. Libya’s January and February average is 3.73 million b/d. Analysts have said Iranian production is unlikely to increase significantly without further investment, much of which has been stymied by remaining U.S. sanctions, the threat of re-imposing the previous sanctions on Iran’s oil sector by the U.S., and Iran’s delays in releasing the full terms of its revamped petroleum contract.

Under the agreement, OPEC pledged to cut 1.2 million b/d for six months and freeze production at around 32.5 million b/d, including Indonesia, which suspended its membership in November and is not included in the S&P Global Platts survey estimates for 2017. OPEC as a whole averaged 32.11 million b/d in January and February, according to the survey. Adding in Indonesia’s typical 730,000 b/d of production would take the producer group about 340,000 b/d above its ceiling.

Since the deal covers an average of January to June output, month-to-month fluctuations are to be expected. The Platts estimates were obtained by surveying OPEC and oil industry officials, traders and analysts, as well as reviewing proprietary shipping data. In concert with OPEC, 11 non-OPEC countries led by Russia have also agreed to cut output by 558,000 b/d in the first half of 2017, with many of those countries phasing in their reductions or relying on natural declines.

A five-country monitoring committee formed to enforce the deal is scheduled to hold a ministerial meeting March 25-26 in Kuwait City. The committee is chaired by Kuwaiti oil minister Essam al-Marzouq and also includes ministers from OPEC members Algeria and Venezuela, along with non-OPEC Russia and Oman.

Tags: Organization of the Petroleum Exporting Countries (OPEC), S&P Global Platts