Opec in no rush, oil up

> Bigger production cut an option but not actively considered for time being, say delegates

LONDON: Opec will not rush into making a further cut in oil output or end some countries’ exemptions to output limits, Opec delegates said, although a meeting in Russia next month is likely to consider further steps to support the market.

Opec and allied non-Opec producers agreed on May 25 to extend an existing supply cut into 2018, but oil has fallen sharply then on rising production from the United States and from Nigeria and Libya, two Opec members exempt from cutting output.

“I doubt it will be considered soon,” said an Opec delegate, referring to the chance of a larger cut. “They will look at this issue most probably in the upcoming meeting in Russia in July.”

Oil ministers from five countries monitoring the deal plus Saudi Arabia as president of the Organisation of Petroleum Exporting Countries are scheduled to meet in Russia on July 24. They could make a recommendation to the wider group, which holds its next meeting in November, on adjusting the pact.

“A larger cut could be an option,” said another Opec delegate, adding that further steps could be to place caps on further growth in Nigerian and Libyan output, rather than requiring them to cut back their supply.

A third source familiar with the matter agreed that removing more crude from the market was an option but said it was not being actively considered.

“It is possible but there are no real discussions now,” this source said, and added that a drawback of the current supply-limiting deal was Nigeria and Libya being exempt.

Comments from key oil ministers also suggest the Opec-led group is in no rush.

Iran said last week Opec was considering further cuts but should wait until the effect of the current reduced level of production became clear.

Saudi Energy Minister Khalid al-Falih was quoted on June 19 as saying the market was heading in the right direction, while Russia said on June 11 there was no need to review the deal.

Falih also said it would be inappropriate” to pressure Libya to slow its output recovery.

Meanwhile, oil prices rose about 2% yesterday and hit a one-week high, boosted by a weaker dollar, short covering and expectations that crude inventories in the United States may decline for the third consecutive week.

Brent crude futures, the international benchmark for oil prices, gained US$1.01 or 2.2%, to US$46.84 (RM201) per barrel by 1549 GMT.

US crude futures were up 92 cents, or about 2%, at US$44.30 per barrel.

Brent touched a one week high at a session high of US$47.06. – Reuters