Russia oil meeting to review Opec production cut takes on heightened importance

The oil producers' meeting scheduled for this month in Russia has taken on heightened significance as oil prices languish at levels not seen since last November.

The Joint Ministerial Monitoring Committee – set up to evaluate compliance with December's output deal between Opec and 13 non-member producers, led by Russia – is scheduled to meet on July 22 to 24 in Moscow or St Petersburg to discuss how things stand.

Although the deal started well, pushing oil prices up about 20 per cent from December through March, the disappointment with the slow pace shrinking of the world oil glut has knocked the market to where it was before the deal. World benchmark North Sea Brent crude futures ended last week at US$46.71 a barrel, having hit a post-deal low below $45 a barrel two weeks ago, or around last year's average.

The defects in the deal were exacerbated by resurgent US shale oil output, attracted back by the higher prices, and more recently by the recovery in production in two exempt Opec members, Nigeria and Libya.

Opec ministers have sent conflicting signals about what options are on the table, including a possible cap on their surging output.

The Energy Minister, Suhail Al Mazrouei, and his Saudi counterpart, Khalid Al Falih, have in recent days maintained that they want to allow several months, following the late-May decision to extend the deal through early next year, to see how it goes.

However, Opec sources said yesterday that Nigeria’s Opec team had been invited to attend this month’s Russia meeting.

Nigeria’s oil minister has said the country would consider curbs when output passes 1.8 million barrels per day (bpd).

Royal Dutch Shell last month lifted force majeure at the key Forcados oil terminal it operates after repairs of damage caused by militants, which is expected to raise Nigeria’s output to at least 2 million bpd.

Libya’s production, meanwhile, this month was above 1 million bpd for the first time in four years, 690,000 bpd higher than the start of the year, after rehabilitating key oil facilities bombed by militants.

The monitoring committee is made up of Algeria, Kuwait and Venezuela, and two non-Opec countries – Russia and Oman. Representatives from Saudi Arabia also usually attend.