Saudi Arabia urged fellow producers in the OPEC+ coalition to persevere with output cuts but conceded the group may delay a meeting to consider the policy.
The likely change in timing reflects uncertainty in an oil market where US sanctions could remove significant supplies from Iran and Venezuela. It’s also the latest sign that Russia, not Saudi Arabia, is setting the agenda for a group that controls more than half of global crude production.
The 24-member coalition known as OPEC+ is nearing a consensus to cancel a scheduled April meeting and make a decision on extending oil-supply cuts in June instead, Saudi Energy Minister Khalid Al-Falih said in Baku, Azerbaijan. “April will be premature to make any decisions for the second half,” he said.
Russia and Iraq, the pact’s two other major producers, have pushed back on committing to rolling over the OPEC+ cuts agreement. Russian Energy Minister Alexander Novak said on Sunday that uncertainties arising from production in Venezuela and Iran make it difficult for the coalition to determine its next step before May or June.
The Saudi minister spoke ahead of a meeting in Baku of a committee of OPEC+ members responsible for monitoring output. The Organization of Petroleum Exporting Countries and its allies have entered their third year of curbing supply in order to defend crude prices. While they’ve helped engineer a 25 percent recovery in Brent this year, current prices of about $67 a barrel remain well below the levels that most of the producers need to cover government spending.
Market fundamentals have “significantly improved but more needs to be done” to remove the glut, Al-Falih said on Monday. “We’re seeing inventories building, and even if they stop building we still have a long way to go” to bring the market back into balance.
At the same time, many investors are skittish about investing in oil exploration and production due to uncertainty, and OPEC+ doesn’t want a situation where crude prices are too high, he said. “We remain ready to continue monitoring supply and demand and doing what we have to do in the second half of 2019 to keep the markets balanced,’’ Al-Falih said late Sunday.
OPEC has faced pressure from U.S. President Donald Trump to “relax” its stance on curbing supply, as severe strains on output from Iran and Venezuela threaten to trigger a shortage.
Al-Falih said the crises haven’t changed his view on the need to continue output restraints, as losses in both those countries haven’t been severe enough to prevent a renewed accumulation of oil inventories. If the slump in Iranian and Venezuelan supplies intensifies, OPEC is prepared to respond as it has in the past, he said.
Producers are conforming well with output cuts they agreed to make starting in January, and their compliance is improving and will easily exceed 100 percent in March, Al-Falih said. Saudi Arabia will pump about 9.8 million barrels a day in March and April and export less than 7 million barrels daily in both months, he said. The kingdom has a production target of 10.3 million barrels a day.
Oil futures slipped in Asian trading on Monday morning, though remain close to a four-month high reached last week. West Texas Intermediate crude for April delivery slid 22 cents to $58.30 at 1:57 p.m. in Singapore.
“We agreed today we need to keep monitoring the situation and by May or June to discuss decisions for the second half of the year,” Novak said on Sunday. Russia has trimmed its output by an average of 140,000 to 150,000 barrels a day in March compared with October, the reference month for Russia’s cuts, Interfax reported.
“Currently, the price is acceptable to all the parties, both to consumers and producers, and you can see that the level of volatility is extremely low,” Novak said in an interview with Bloomberg. “We may be balanced today but we don’t know what’s going to happen.”
Iraq is doing its best to adhere to its pledged reduction and will pump less in March than in either January or February, Thamir Ghadhban, the Iraqi minister, said. While welcoming the price boost from the current accord, he said he hopes that producers continue to put into effect the cuts they’ve promised.
“We should continue till June and then decide, but we are continuously observing and analyzing the market,” Ghadhban said.For all the latest energy and oil news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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