Kuwait’s minister says OPEC and non-OPEC could deepen oil cuts
Saudi, Russia, Iraq support extending cuts by 9 months
VIENNA, May 24, (RTRS): OPEC and nonmember oil producers could deepen output cuts or extend them for a year at a meeting in Vienna this week, Kuwait said on Wednesday, as they seek to clear a global stocks overhang and prop up the price of crude.
The top oil producer in OPEC, Saudi Arabia, favours extending the output curbs by nine months rather than the initially planned six months, to speed up market rebalancing and prevent crude prices from sliding back below $50 per barrel.
OPEC members Iraq and Algeria as well as top non-OPEC producer Russia also said they support a ninemonth extension.
As ministers gathered in Vienna for informal consultations, Saudi OPEC ally Kuwait said discussions included the possibility of deepening the cuts or prolonging them by 12 months.
“All options are on the table,” Kuwaiti oil minister Essam al-Marzouq told reporters.
The Organization of the Petroleum Exporting Countries meets formally in Vienna on Thursday to consider whether to prolong the deal reached in December in which OPEC and 11 non-members agreed to cut output by about 1.8 million barrels per day in the first half of 2017.
On Wednesday, several OPEC and non-OPEC ministers including those from Saudi Arabia and Russia are meeting in the Austrian capital to discuss the progress of cuts and their impact on global oil supply.
Several delegates and ministers including Algeria’s said they did not believe cuts could be extended by a full year. Ecuador, Algeria and Venezuela said deeper cuts were not necessary.
OPEC’s second-largest producer, Iraq, had insisted on limiting the extension to six months but said this week it would not object to a ninemonth prolongation after talks with Saudi Arabia.
Iranian Oil Minister Bijan Zanganeh, who clashed with Saudi Arabia in many previous OPEC meetings, has so far kept a low profile, saying extensions of six or nine months were possible.
Under the existing deal, Iran received an exemption slightly to raise output, which has been curtailed by years of Western sanctions.
Iran’s production has been stagnant in recent months, suggesting limited upside potential at least in the short term.
OPEC’s cuts have helped push oil back above $50 a barrel this year, giving a fiscal boost to producers, which heavily rely on energy revenues and have had to burn through foreigncurrency reserves to plug holes in their budgets.
The oil price decline, which started in 2014, forced Russia and Saudi Arabia to tighten their belts and led to unrest in some producing coun-
tries including Venezuela and Nigeria.
While the market sees an extension by nine months as the base-case scenario, surprises on Thursday could include a deepening of the cuts.
A substantial additional cut was unlikely, one OPEC delegate said, “unless Saudi Arabia initiates it with the biggest contribution and is supported by other Gulf members”.
By 1230 GMT on Wednesday, Brent crude was down around 0.2 percent at $54.03 a barrel.
But the price rise has spurred growth in the US shale industry, which is not participating in the output deal, thus slowing the market’s rebalancing with global stocks still near record highs.