OPEC Secretary-General Haitham Al-Ghais recently travelled to Iraq and Kazakhstan, two of the top dodgers, to discuss the “timely implementation of production adjustments, including the compensation plans”. In a press release last month, OPEC called the trips “successful”. I’m a bit more circumspect. The market has heard it all before, and so far, there’s little sign that either Baghdad or Astana is seriously reducing oil output. Yet Saudi Arabia is applying diplomatic pressure like never before, so there’s a chance that this time is different.

Maybe.

Both Iraq and Kazakhstan rely on foreign investors to boost production, and both have plans to expand capacity. Cheating is the only way to remain inside OPEC+ while at the same time rewarding foreign investors.

The cheaters not only continue to cheat on their original quotas but also on the compensation quotas. Cheating on the anti-cheating.

Russia, also a repeat cheater, faces its own penance. As with the previous two output cuts, I don’t expect Moscow to implement the reductions the compensation mechanism mandates. The biggest problem, however, lies elsewhere: the United Arab Emirates. It is, so to speak, the oil barrel in the room: no one speaks about it, but everyone thinks of it. Officially, the UAE isn’t breaching the rules. Abu Dhabi claims it pumps just 2.9 million barrels a day, exactly as it should. OPEC, which tracks member production by following several external data providers, puts UAE output at about 2.9 million barrels a day. Everyone else, though, has a higher number — in some cases, much higher.

The International Energy Agency puts Emirati oil production at 3.3 million barrels a day. Ask oil traders, who keep close tabs on tankers coming and leaving the UAE, and you’ll likely hear even higher numbers. It’s common to hear estimates of about 3.5 million barrels a day. If true — and independent tanker tracking data suggest the traders are right — that would make the UAE the biggest cheater.

Why is OPEC turning a blind eye to Abu Dhabi? Politics. The cartel is striking a balance between allowing the UAE to profit from the billions of dollars it has spent in new production facilities and keeping the global oil market stable.

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In 2021, Saudi Arabia risked a major rift inside the group when it publicly admonished the UAE for cheating. The problem was solved in two steps. First, Abu Dhabi briefly reduced its output. Second, a few months later, OPEC removed the IEA from the data providers it uses to calculate compliance. What can’t be seen must not be real — or so the cartel thought. The difficulty, of course, remains. Every oil trader knows about the overproduction.