Top OPEC members were putting 'pedal to the metal' ahead of planned output cuts
Three countries responsible for more than half of OPEC's planned production cuts exported at or near records through the end of 2016, according to Matt Smith, director of commodity research at tanker-tracking firm ClipperData. Saudi Arabia, Kuwait and the United Arab Emirates have pledged to reduce their combined output by 756,000 barrels a day from October levels. The Organization of the Petroleum Exporting Countries in November agreed to take 1.2 million barrels a day off the market in a bid to reduce huge stockpiles of crude that have built up in recent years.
More than two years of low oil prices sparked a battle for market share among OPEC members. Record-high export levels through the end of 2016 show that battle continued to the very last day of the year, Smith said. "Really, these guys have been going hell for leather here, pedal to the metal, before screeching to a halt as they try to reach compliance," Smith told CNBC's "Squawk Box" on Wednesday, days after the output cuts went into effect.
To be sure, many analysts see Saudi Arabia, Kuwait and the UAE as among the most likely to adhere to the agreed-upon cuts. Still, the three countries will likely have to cut their exports meaningfully if they are to achieve their promised production cuts, Smith told CNBC.
Market watchers will get OPEC's official report on December output in two weeks, and the cartel's compliance committee meets Jan. 21 and 22 to assess how well members are adhering to the cuts. Export levels will provide an important litmus test for compliance throughout OPEC's planned cuts in the first half of 2017, Smith said.
"It's the most transparent way we have to see if they're adhering to the production cuts, given they depend upon these exports for revenues," he said. "They would be the last thing to be cut."