OPEC has historically relied on diplomatic persuasion and, to some degree, public finger pointing, said Andrew Slaughter, executive director of Deloitte’s Center for Energy Solutions.
“There’s no compliance mechanism in the sense that there’s punitive actions that can be taken. OPEC doesn’t work like that,” he said.
There are some signs of progress. Following the St. Petersburg meeting, the United Arab Emirates, which continues to pump above its production quota, committed to reducing its shipments by 10 percent in September. That came after Saudi Arabia announced it would limit its own exports in August.
But OPEC’s second largest producer Iraq is also lagging behind on compliance, and Baghdad faces a tougher time managing its oil output than its Gulf neighbors.
Baghdad does not entirely control the flow of oil from semi-autonomous Iraqi Kurdistan. Much of its oil is produced in partnership with international oil companies, so it has contractual agreements that make it difficult to throttle back output.
One lever the Iraqis can pull is the pace of investment, according to an Ian Thom, principal analyst for Iraq energy research firm Wood Mackenzie. Just like U.S. drillers have cut back spending to weather the oil price downturn, Iraq can delay oil field expansions and construction of big energy-related infrastructure projects.