OPEC MAY EXTEND OUTPUT CUTS
dubai — Oil prices are expected to remain high with the global deal on oil production poised to be extended to the end of 2019 and Opec leader Saudi Arabia asserting that it would not rush to boost supply to make up for a loss of Iranian crude due to US sanctions.
Saudi Energy Minister Khalid Al Falih said on Tuesday that the kingdom would stick to a global deal on oil output, which could be extended to the end of 2019. “We do not need to voluntarily exceed the limits set,” he said.
Oil prices have surged by almost 40 per cent since January, lifted by the Opec+ supply cuts as well as by US sanctions on producers Iran and Venezuela.
Brent crude futures hit a session high of $73.27 per barrel and traded 84 cents higher at $72.88 a barrel by 1335 GMT, while US crude futures were at $64.32, up 63 cents a barrel.
“The Iran sanctions come on top of already fragile supplies and raise concerns about tightening markets,” Norbert Ruecker of Swiss bank Julius Baer said.
A monthly survey of 31 economists and analysts forecast Brent crude would average $68.57 a
I confirm our commitment to meet all these requests to replace Iranian oil Khalid Al Falih, Saudi Energy Minister
Our expectation is for Opec+ output to increase in the second half of 2019 as members chase higher oil prices but ultimately will contribute to an oversupplied market
Edward Bell, Commodities analyst, Emirates NBD Research
barrel in 2019, more than two per cent higher than the $67.12 forecast in the previous poll in March.
The Saudi Minister said the kingdom was ready to meet consumer demand after the Iran oil waivers expire in early May, including by replacing Iranian oil with Saudi supplies.
The Opec plus Russia and other producers, an alliance known as OPEC+, agreed to cut output by 1.2 million barrels per day from January for six months in an effort to boost oil prices.
Oil producers will meet on June 2526 to decide whether to extend the pact or adjust supply targets.
“We will look at global oil inventories to find out whether they are they higher or lower than the normal level and then will adjust the production level accordingly. Based on what I see now ... I am eager to say there will be some kind of agreement,” Falih was quoted as saying. Igor Sechin, head of Russian state oil company Rosneft, said the output deal would remain the same, or could change up or down. Sechin signalled Russia would not help replace Iranian oil on the market after the expiration of waivers on US sanctions against Tehran’s crude exports.
“The elimination of US waivers for Iran will take another 0.5-1 million barrels per day from the oil market,” said Frank Schallenberger, head of commodity research at LBBW.
“Together with political tensions in Libya and chaos in Venezuela this will make the tight situation on the supply side of the oil market even tighter. There is no doubt that high oil prices are here to stay,” said Schallenberger.
“If Opec and its allies do not make an allowance for on-going unplanned outages in Venezuela and Iran, they could run the risk of over-tightening the oil market should they decide to roll over production cuts when they meet again in Vienna in June,” said Harry Tchilinguirian, strategist at BNP Paribas.
A majority of analysts who participated in a poll expect Opec cuts to be extended until the end of the year, but at the same time they expect the group to recoup deteriorating output from Venezuela and Iran.
“Our expectation is for Opec+ output to increase in the second half of 2019 as members chase higher oil prices but ultimately will contribute to an oversupplied market,” said Edward Bell, commodities analyst, Emirates NBD Research.
Asia’s top oil importers China, India, Japan and South Korea imported a total 1.57 million bpd from Iran in March, up 36 per cent from the previous month to the highest since July, latest data showed.
US Secretary of State Mike Pompeo said that the US would seek to stabilise global oil market after Washington’s decision not to extend sanctions waivers for Iran oil purchase.
“We are convinced we can make sure the markets are adequately supplied. We are continuing to work on that. The US would cooperate with other alternative suppliers home and abroad on the matter,” Xinhua quoted Pompeo as saying during an event on Monday.
The US decided last week not to renew exemptions from sanctions against Iran granted last year to buyers of Iranian oil, taking a tougher line than expected. Oil prices rose on concerns of a tighter oil market.
Already Opec supply hit a four-year low in April due to further involuntary declines in sanctions-hit Iran and Venezuela and output restraint by top exporter Saudi Arabia, a survey found.
The 14-member group pumped 30.23 million bpd this month, the survey showed, down 90,000bpd from March and the lowest Opec total since 2015.