Extension for Opec production limits
OIL EXPORTING countries plan to extend their current production limit by another nine months, Opec ministers said yesterday as they met in Vienna to formally decide on the move.
The members of Opec and 11 other oil producers led by Russia have been pumping 1.8 million fewer barrels per day (bpd) than last year since January, in a rare alliance designed to bolster prices.
“As far as Opec is concerned, keeping the level of the cut for another nine months will help to balance the market,” said Iraqi Oil Minister Jabbar Ali Hussein al-Luiebi.
Shortly before the Opec and non-Opec ministers met in Vienna, reports surfaced that the output limit might be extended from July for a whole year, rather than for only nine months.
However, ministers from countries such as Iran, Iraq and Kuwait told reporters that nine months is the most realistic scenario.
“We don’t want to put a burden on countries that cannot afford longer cuts,” Kuwaiti Oil Minister Issam Almarzooq said.
The Opec group first gathered for a meeting in the morning, ahead of a scheduled meeting with non-Opec members in the afternoon.
Lavish lifestyles Before that joint meeting, Opec accepted Equatorial Guinea as its 14th member. The impoverished country is rich in oil and gas, but its commodity revenues have been used to finance lavish lifestyles by the ruling elite, according to a report by advocacy group Human Rights Watch.
With a production of around 300 000 bpd, the West African country is one of Opec’s smallest oil producers, Opec statistics show. Equatorial Guinea had been among the non-Opec countries that agreed to the output cut late last year.
“The cut that we made is working,” said Saudi Arabia’s energy minister Khalid alFalih, Opec’s largest producer.
However, the strategy of the 24 involved countries only initially boosted crude oil prices to around $55 (R715.70) per barrel earlier this year, and oil has since mostly been trading between $50 and $54.
As markets have been expecting the current output limit to be extended, benchmark prices for European and US oil did not rise yesterday but fell to $53.24 and $50.56 per barrel respectively.
Strong US oil production is the main reason why the cut has not had a bigger effect, according to analysts.
Opec, which accounts for a third of global production, has been fighting for market share with the US.
While several Opec ministers said they were not worried about US oil, Venezuelan petroleum minister Nelson Martinez said that “obviously it is a threat.”
Before the production cut was decided late last year, Opec had been flooding the market with oil in the hope of hurting US producers by lowering global prices. North American production methods relied on higher prices because they are costlier than those used in Opec countries.
However, the fracking method used to extract oil from rocks in the US has recently become more efficient and therefore less vulnerable to low prices. – dpa