St. Petersburg – Brent crude oil rose more than $1 on Monday after Saudi Arabia pledged to cut exports in August to 6.6 million barrels per day to help reduce the global crude glut, almost 1 million bpd below levels a year ago.
OPEC said stocks held by industrial nations had fallen by 90 million barrels over January to June, but were still 250 million barrels above the five-year average, which is the target level for OPEC and non-OPEC countries.
Speaking at the meeting of the 4th OPEC-Non-OPEC Ministerial Monitoring Committee in St. Petersburg, Russia, Saudi Energy Minister Khalid al-Falih said OPEC and non-OPEC partners were committed to cut output longer if necessary but would demand that non-compliant nations stick to the agreement.
The market was under pressure because OPEC committed to reducing production and increase production of OPEC members Nigeria and Libya which have been exempt from the output cuts.
On Monday, OPEC was heading towards setting a limit on Nigerian oil production and asked other members to commit to reduction.
OPEC has agreed with several non-OPEC producers led by Russia to cut oil output by a combined 1.8 million bpd as of January 2017 until the end of March 2018.
Libya and Nigeria were exempted from the limits to help their oil industries recover from years of unrest.
The deal to curb output propelled crude prices above $58/barrel in January but they have since slipped back to a $45 to $50 range as the effort to drain global inventories has taken longer than expected.
An OPEC and non-OPEC states ministerial committee that monitors the global oil pact said it had agreed Nigeria would join the deal by cutting its output from 1.8 million bpd, once it stabilizes at that level from 1.7 million bpd recently. The committee did not set a timeframe for when this would happen, saying it would track Nigerian production patterns in the next weeks.
The committee did not back capping Libyan output as it said its production was unlikely to exceed 1 million bpd in the near future compared to its capacity of 1.4 million-1.6 million bpd before unrest erupted in 2011.
Libya’s oil production has reached 1.069 million bpd, a Libyan oil source told Reuters.
Libya produces over 1 million bpd, less than its production capabilities ranging between 1.4 and 1.6 million bpd.
OPEC Secretary General Mohammad Barkindo said Nigeria had no intention of going beyond its production target of 1.8 million bpd, reiterating there was no discussion of deeper output cuts.
Russia and Saudi Arabia face mounting pressure to prop up oil prices. Russia, which is heavily reliant on oil revenues, holds a presidential election next year. Saudi Arabia needs higher prices to balance its budget and support next year’s planned listing of state oil firm Saudi Aramco.
“We must acknowledge that the market has turned bearish with several key factors driving these sentiments,” Falih told the meeting of the monitoring committee.
Falih said weaker compliance with cuts by some OPEC states and a rise in OPEC exports had led to a softer crude price.
Saudi Arabia and Kuwait have cut more than they pledged but others, such as the United Arab Emirates and Iraq, have shown relatively weak adherence to the limits.
“Some countries continue to lag which is a concern we must address head on,” Falih said, adding that “exports have now become the key matrix to financial markets and we need to find a way to reconcile credible exports data with production data.”
Falih said the committee spoke to those who were lagging and said they pledged to boost compliance.
The Saudi minister said global oil demand was expected to grow by about 1.4 million to 1.6 million bpd next year, similar to 2017 and so should more than offset rising US output.
Chair of ministerial monitoring committee Kuwait said OPEC could call an extraordinary meeting to include Nigeria and could extend existing production curbs till after March 2018 if markets failed to re-balance.
Russia’s energy minister Alexander Novak told reporters that Nigeria and Libya should join the deal to cut global oil production agreed by OPEC and Russia as soon as their output stabilizes.
Novak also said that an additional 200,000 bpd could be removed from the market if compliance with a global deal to cut output was 100 percent.
“We believe that once oil output in Libya and Nigeria stabilizes, there will be less uncertainty on the market as to their future moves,” Novak said.
Non-OPEC member Oman’s oil minister Mohammed al Rumhy told reporters he saw no need for additional production cuts from OPEC and non-OPEC producers.
Since the beginning July, Russia’s production was reduced between 303,000 and 305,000 bpd.