Cairo, Abu Dhabi – OPEC members might extend the agreement to cut outputs in order to achieve the desired rebalancing of the market, announced Saudi Arabia and Kuwait.
Saudi Energy Minister Khalid al-Falih said that oil-producing countries might have to prolong output cuts agreed for the first six months of the year, explaining: “We might have to extend in order to reach the target… of stock levels.”
Falih, whose country is the world’s largest exporter, said at an energy forum in Abu Dhabi that there was a sort of “initial agreement” on the need to extend the deal after talks in Kuwait last month.
He said producers would continue to assess market figures until next month, when ministers are expected to take a final decision at a meeting in Vienna.
“There was a high level of commitment in the first three months, but despite that, we have not achieved the target” of reducing the supply glut, he said.
OPEC members agreed in November to cut production by 1.2 million barrels per day for six months beginning from the start of the year in a bid to shore up prices. Some non-cartel producers, led by Russia, joined in December by committing to cut output by 558,000 bpd.
Kuwaiti Oil Minister Essam al-Marzouk said there was a “significant” commitment by producers from outside OPEC, and called for prolonging the cuts.
“It is important that we agree to extend the agreement,” he told the forum.
Oil prices currently hover just over $50 per barrel after shedding around half of their value since mid-2014. Observers believe that Washington’s failure to join the agreement will keep the prices hovering between $50 and $55.
The International Energy Agency said last week that the compliance with the agreement among OPEC members and some non-members, including Russia, “has been impressive”, giving a lift to oil prices.
But it added that improved prices had attracted higher-cost producers in the United States back to the market, raising the prospect of surprisingly high levels of non-OPEC supply throughout the year.
It said that if OPEC were to extend its output cut, that would boost prices, giving further encouragement to US shale oil producers to pump more.
Oil inventories fell in March but probably showed a rise in the first quarter overall because consumers stockpiled crude before the OPEC-led cuts took full effect, the IEA said.
Oman’s Oil and Gas Minister Mohammed bin Hamad al-Ramhi told reporters at the Abu Dhabi forum that a “large” number of producers prefer to extend the agreement to cut outputs in order to raise the cost of petroleum.
Patrick Pouyanné, chairman and CEO of France’s Total oil and gas company, said on Thursday: “The prices of oil could drop again at the end of the year due to the United States’ rapid increase in shale production.”