Iraq, Angola signal willingness to extend oil output cuts

Both may continue production curbs into second half of the year

NEW YORK: Two Organisation of Petroleum Exporting Countries (Opec) members signalled a willingness to extend the group’s production curbs into the second half of the year as the global rally in prices shows signs of stalling.

“We are satisfied somewhat, but we are looking forward for improvement in the price,” Iraq Oil Minister Jabbar Al-Luaibi said in an interview at the CERAWeek oil-industry conference in Houston.

Asked if Opec should extend its agreement on output cuts beyond the first half of this year, Al-Luaibi said, “It’s likely we need to.” Iraq has “fully” complied with the reductions agreed to last year, he added.

Angola, another Opec member, supported prolonging the deal as long as necessary, Isabel dos Santos, chairman of state-run oil company Sonangol, said in a separate interview at the conference.

The company had no plans to increase capital spending this year or next, and may even lower its budget compared to the last two years, dos Santos said.

As of the end of February, both Iraq and Angola are lagging behind the cuts they pledged in November, according to a Bloomberg News survey of analysts, oil companies and ship-tracking data. Angola had reached 78% of its target, and Iraq was at 58%.

Opec and 11 other major producers agreed last year to slash production, spurring a 17% increase in US oil prices during the last five weeks of 2016. The rally stalled this year as US output and supplies continued to grow.

In one sign momentum may be petering out, hedge funds last week eased off on bets that US prices will push higher in the coming months.

Benchmark West Texas Intermediate (WTI) crude bounced between US$51.22 and US$54.94 in February, the tightest range since August 2003. WTI for April delivery slipped 13 US cents on Monday to settle at US$53.20 a barrel on the New York Mercantile Exchange.

Crude inventories in the US rose to 520.2 million barrels last week, the most in data going back to 1982, the Energy Information Administration reported on March 1. Data showed that American output has increased to the highest in almost a year.

Overall, Opec production fell to 32.17 million barrels a day in February, a 65,000 barrel-a-day drop from January, the first month of the accord, according to a Bloomberg News survey of analysts, oil companies and ship-tracking data.

The 10 members of the group that pledged to make cuts in Vienna in November implemented 104% of those reductions, largely because Saudi Arabia exceeded its own commitments. Iraq’s production dropped by 50,000 barrels to 4.44 million barrels a day, the survey showed.

Russia, the biggest non-Opec producer to join the deal, believed it’s premature to discuss extending the output cuts, Oil Minister Alexander Novak said during a news conference at CERAWeek on Monday.

His county has already achieved about half of the reductions it promised and is ahead of plans overall to rein in production, Novak said. Oil prices would likely float between US$55 and US$60 a barrel this year, he added.

Last year’s agreement, he said, helped avoid “chaos” in the global oil markets. — Bloomberg