Oil at $50 to $55 is a sweet spot: Kuwait
kuwait city — Oil at $50 to $55 a barrel would put producers in a “good position” with stockpiles expected to fall later this year, according to Kuwait’s Oil Minister Issam Al Marzouq.
“I think if we can retain $50 to $55 throughout 2017, we will be in a good position,” Al Marzouq said in a Bloomberg TV interview from Kuwait City. Brent crude, the global benchmark, has dropped 11 per cent this year, and was trading at $50.46 a barrel by 12.35pm in Dubai.
Al Marzouq said he’s not surprised prices have fallen this year. Despite the cut in production by Opec and other major producers since January, US inventories have actually climbed because of refinery maintenance, and slow demand in the first quarter, he said.
Kuwait joined Opec’s biggest producer Saudi Arabia in saying oil inventories need to fall to the fiveyear average. They now stand about 285 million barrels above that, Al Marzouq said. If Opec and 11 other producers that agreed to reduce output reach their targeted cuts, inventories should fall to the five-year average by the end of the third quarter, he said. Compliance was 94 per cent in February, according to the monitoring committee headed by Al Marzouq.
Ministers from seven of the 24 countries participating in the cuts deal met on Sunday in Kuwait City to monitor compliance.
Extending the cuts
The ministerial committee of Opec ministers from Kuwait, Algeria and Venezuela and their counterparts from Russia and Oman concluded meetings in Kuwait City on Sunday with a statement asking Opec to review the market and give them a recommendation in April on rolling over the cuts. Kuwait, four other Opec nations and Oman want an extension of the cuts because more time is needed to drain swollen stockpiles.
Meanwhile, Russia isn’t ready to support a possible extension of oil supply cuts into the second half of the year, even as more crude producers acknowledge they will probably need to do so to achieve their
At the moment, all companies are conforming to their obligations Alexander Novak, Russia’s Energy Minister
goals of balancing the market and firming up prices.
Russia needs more time to assess the market, inventories and production in the US and other non-Opec countries, Russia’s Energy Minister Alexander Novak said. The monitoring committee discussed the option of extending the cuts “but we have decided that in order to make any decision like this or even any recommendations, there needs to be a ministerial meeting.” Opec ministers are due to meet in Vienna on May 25.
Russia has cut its production by 185,000 barrels a day compared with a target of 300,000, Novak said Saturday. It was always the plan to implement the reductions in output gradually, and Russia’s progress has been faster than anticipated, he said on Sunday. Much of Russia’s oil production is in the hands of listed companies, giving the state less control over production than a state-run monopoly such as Saudi Aramco.
“We are monitoring companies on a weekly basis for their production plans,” Novak said. “At the moment, all companies are conforming to their obligations. Companies don’t want to stand out among a group that is conforming.”
Novak declined to speculate on oil prices, after Russia’s central bank said last week that it saw a risk of oil prices falling to $40 a barrel by the end of this year without an extension in the deal and then staying close to that level in 2018-19. Benchmark Brent crude closed Friday at $50.80 a barrel.
“The Finance Ministry always bases the budget on very conservative numbers,” Novak said. “In real life, we might see different numbers.”
Russia will hold an energy dialogue meeting with Opec in Moscow on May 31, Novak told reporters in Kuwait. — Bloomberg