New York - Venezuela, Iraq and Oman added their support for a possible extension of global oil-production cuts beyond June as momentum builds among Opec members and other crude producers to prolong the strategy to rebalance the market and prop up prices.
Oil ministers for the three countries commented yesterday, a day after Algeria’s energy minister Noureddine Boutarfa called for an extension, because he said the strategy was succeeding in paring global inventories. The ministers are meeting in Kuwait City to discuss compliance with the pledged reductions. So far, five Opec members, including Kuwait and Angola, have backed an extension of the cuts.
“We are ready to support” prolonging the six-month deal, which took effect in January, Venezuela’s oil minister Nelson Martinez said before the meeting. “It does make sense to extend the agreement for another six months - maybe at least,” said his Omani counterpart, Mohammed Al Rumhy.
Oman, unlike Venezuela, is not a member of Opec.
Russia is moving ahead with its own reductions to curb a glut. “It’s important to accomplish last year’s deal first,” Russia’s energy minister Alexander Novak said, adding that the country would target its pledged reduction of 300000 barrels a day by the end of April.
Kuwait this month became the first nation to call for extending the production cuts, with oil minister Issam Almarzooq saying inventories had grown more than expected. Opec and 11 other major producers including Russia agreed last year to slash production, spurring a 20 percent increase in Brent crude prices during the last five weeks of 2016. The rally stalled this year as US output and supplies continued to grow. Opec ministers will meet in Vienna in May to decide whether to extend the deal.
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Brent crude futures closed on Friday at $50.80 (R631.54) a barrel in London, down 96 cents, or 1.9 percent, for the week. The benchmark grade has dropped 11 percent in 2017 and reached a low for the year of $49.71 a barrel on March 22.
Novak said the joint ministerial monitoring committee, comprising three Opec members and two producers outside the group, would discuss the possibility of prolonging the cuts beyond June.
With US crude stockpiles swelling to record levels and prices sinking below $50 a barrel, Opec and its partners have little choice but to keep going, according to analysts.
Oil inventories are high because of low US demand and higher supply, and the market should rebalance in the second half of the year, Opec secretary-general Mohammad Barkindo said in Kuwait. Inventories in countries in the Organisation for Economic Co-operation and Development are currently 282million barrels higher than their five-year average, he said at the meeting. Khalid Al-Falih, the energy minister of Opec’s biggest producer, Saudi Arabia, said in an interview on March 17 that the deal will be maintained if oil stockpiles are still above their five-year average.
It is too early to decide on an extension of the output cuts, and Opec will take up the issue in May, Barkindo said at yesterday’s meeting, during which ministers will monitor compliance with the targeted reductions.
Opec’s compliance rate was 106percent in February, and non-Opec nations, including Russia, have reached compliance of 64 percent, Kuwait’s Almarzooq said.