Oil exporters beat glut rut as crude rises to highest in over two years

UAE minister said OPEC will discuss extending cuts at next meeting

VIENNA: Oil prices rose on Monday to their highest in eight months as oil producers clear a supply glut that has weighed on crude prices for three years.

Brent futures traded above $58 a barrel on Monday, after major producers said at a meeting in Vienna on Friday that the global market was well on the way to rebalancing.

OPEC, Russia and several other producers have cut production by about 1.8 million barrels per day (bpd) since January.

“On the basis of the current IEA estimates, the oil market is more or less balanced in the second half of the year,” said Commerzbank in a note. “For stocks to be reduced any further, however, the oil market would have to show a deficit, so the optimism appears exaggerated.”

Russian Energy Minister Alexander Novak said OPEC and other producers now needed to work on strategy beyond March next year, when the current pact on cuts ends.

“We need not only to keep up the pace but continue our coordinated joint actions in full, but also work out a strategy for the future, to which we will stick starting from April 2018,” he said, adding oil demand was rising at a “high pace.”

Officials said before Friday’s meeting that the Joint Ministerial Monitoring Committee would consider extending the supply cut pact.

The committee can make policy recommendations for the wider group of OPEC and non-OPEC producers, which meets in November.

Global oil inventories have shown signs of falling, although OPEC-led efforts to cut stockpiles to their five-year average has taken longer than expected. Oil prices remain at only half their level of mid2014.

Kuwait’s minister said there were a “number of positives” in the market, including stock levels in industrialized OECD states in August that were 170 million barrels above the five-year average, down from 340 million barrels in January.

He also said oil in floating storage was falling and cited a shift of benchmark Brent prices into backwardation, a market condition in which it is more attractive to sell oil immediately rather than storing it for later sale, indicating tighter supplies.

OPEC will discuss extending production cuts that have boosted oil prices and imposing output quotas on all cartel members at a November meeting in Vienna, said UAE Energy Minister Suheil Al-Mazrouei, AFP reported.

“The next OPEC meeting will discuss whether there will be a need to extend the output cuts deal and for how long,” Mazrouei told reporters. “The meeting will also discuss adding new producers to the cuts deal,” the minister said.

Mazrouei said OPEC will also discuss imposing the quota system to countries that have so far been exempted.