OPEC Secretariat to submit recommendations in April
KUWAIT: A joint committee of ministers from the Organization of the Petroleum Exporting Countries (OPEC) and nonOPEC oil producers has agreed to review whether a global pact to limit supplies should be extended by six months, it said in a statement on Sunday.
An earlier draft of the statement said the committee “reports high level of conformity and recommends six-month extension.”
But the final statement said only that the committee had requested a technical group and the OPEC Secretariat “review the oil market conditions and revert ... in April, 2017 regarding the extension of the voluntary production adjustments.”
It was not immediately clear why the wording had been changed, although a senior industry source said the committee lacked the legal mandate to recommend an extension.
OPEC and rival oil-producing countries met in Kuwait to review progress with their global pact to cut supplies. OPEC and 11 other leading oil producers including Russia agreed in December to cut their combined output by almost 1.8 million barrels per day (bpd) in the first half of the year.
“Any country has the freedom to say whether they do or they do not support (an extension). Unless we have conformity with everybody, we cannot go ahead with the extension of the deal,” Kuwaiti Oil Minister Essam Al-Marzouq said, adding that he hoped a decision would come by the end of April.
The ministerial committee “expressed its satisfaction with the progress made toward full conformity with the voluntary production adjustments and encouraged all participating countries to press on toward 100 percent conformity,” the statement said.
The December accord, aimed at supporting the oil market, has lifted crude to more than $50 a barrel. But the price gain has encouraged US shale oil producers, which are not part of the pact, to boost output.
The committee said it took note that certain factors, such as low seasonal demand, refinery maintenance and rising non-OPEC supply had led to an increase in crude oil stocks. It also observed the liquidation of positions by financial players.
“However, the end of the refinery maintenance season and noticeable slowdown in US stock build as well as the reduction in floating storage will support the positive efforts undertaken to achieve stability in the market,” it said.
It asked the OPEC Secretariat to review oil market conditions and come back with recommendations in April regarding an extension of the agreement.
“This reaffirms the commitment of OPEC and participating non-OPEC countries to continue to cooperate,” the statement said.
Russian Energy Minister Alexander Novak said it was too early to say whether there would be an extension, although the agreement was working well.
Before the meeting, Iraqi Oil Minister Jabar Ali Al-Luaibi told reporters there were some encouraging elements that suggested the oil market was improving, and that if all OPEC members agreed measures to help price stability, Iraq would support such steps.
“Any decisions taken unanimously by members of OPEC ... Iraq will be part of the decision and will not be deviating from this,” Al-Luaibi said.
Iraq’s oil production is running at 4.312 million bpd this month, he said, adding that his country had cut its oil exports by 187,000 bpd so far and would reach 210,000 bpd in a few days.
Compliance with the supply-cut deal was 94 percent in February among OPEC and non-OPEC oil producers combined, Novak said, adding that Russia is committed to cuts of 300,000 bpd by the end of April.
The Russian energy minister said he expects global oil stockpiles to decrease in the second quarter of this year.
“The dynamics are positive here, I believe,” Novak said, adding that inventories in the US and other industrialized countries had risen by less than in the past.
Al-Marzouq said the market may return to balance by the third quarter of this year if producers comply fully with their production targets.