‘Consensus on extending crude production curbs’
If oil inventories increase in 2018 as some in the market expect, producers may have to consider rolling the supply cut agreement into 2019, but the exact mechanism for cooperation next year has not yet been decided.
MUSCAT: Opec and non-Opec oil producers have a consensus that they should continue cooperating on production after the end of 2018, when their current agreement on production cuts expires, Saudi Arabian energy minister Khalid Al Falih said on Sunday.
If oil inventories increase in 2018 as some in the market expect, producers may have to consider rolling the supply cut agreement into 2019, but the exact mechanism for cooperation next year has not yet been decided, Al Falih said.
He was speaking at a news conference after a meeting of the joint ministerial committee which oversees implementation of the cuts. The committee includes Russia and Kuwait, among other countries.
It was the first time that Saudi Arabia had publicly raised the possibility of a new form of coordination among oil producers after 2018. Their agreement on supply cuts, originally launched last January, is due to expire in December this year.
Al Falih also said extending cooperation would convince the world that coordination among producers was “here to stay.”
The Organisation of Petroleum Exporting Countries (Opec) and non-Opec producers led by Rus- sia in last November agreed to extend oil output cuts until the end of 2018 as they try to finish clearing a global glut of crude oil. The producers’ current deal is for cutting about 1.8 million barrels per day (bpd) in an effort to boost oil prices. As part of the deal, the Sultanate has been cutting 45,000 barrels of crude oil production per day (or roughly 5 per cent of output).
“We should not limit our efforts to 2018 — we need to be talking about a longer framework of cooperation,” Al Falih said. “I am talking about extending the framework that we started, which is the declaration of cooperation, beyond 2018.
“This does not necessarily mean sticking barrel by barrel to the same limits or cuts, or production targets country by country that we signed up to in 2016, but assuring stakeholders, investors, consumers and the global community that this is something that is here to stay. And we are going to work together.”
Al Falih said the global economy had strengthened while supply cuts — in which Saudi Arabia has shouldered by far the largest burden — had shrunk oil inventories around the world. As a result, the oil market will return to balance in 2018, he said.
But he said producers still had a lot of hard work ahead to restore the market to health, and it was unlikely to reach balance by the middle of this year.
Al Falih and energy ministers from Oman and the United Arab Emirates noted that the rise of the Brent oil price to three-year highs around $70 a barrel in recent weeks could cause an increase in supply of shale oil from the United States.
But both Al Falih and UAE minister Suhail Al Mazroui said they did not think the rise in prices would hurt global demand for oil.
Kuwait’s oil minister Bakheet Al Rashidi said any discussion among producers on the future of the agreement on supply cuts would not occur on Sunday, but was expected to happen at a meeting in June. Opec and other producers led by Russia are next scheduled to meet to discuss oil policy in June.
The next Joint Opec-Non-Opec Ministerial Monitoring Committee (JMMC) will be held in April in Saudi Arabia, Russian RIA news agency reported on Sunday, citing an Opec statement.