Oil prices are expected to rise further as Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC extends the production cut deal to December 2018.
Saudi Arabia’s Energy Minister, Mr Khalid al-Falih, made this known on Thursday in Vienna, in a press conference at the end of the third OPEC and non-OPEC Ministerial meeting.
al-Falih, who is also the President of OPEC said that the ministers had also agreed that Nigeria and Libya should not produce more than their current production levels in 2018.
He said that with the cut deal, the global oil market would continue to witness reduction of about 1.8 million barrels of oil supply daily.
There was a sharp global inventory build-up between mid-2014 and the start of 2016 as supply outpaced demand.
By July 2016, the oil stock overhang reached 385million barrel.
” We reviewed the report from Joint Ministerial Monitoring Committee (JMMC), we discovered that there are number of veritable determined supply from participating countries, we don’t expect uncertainties from some of our members.
“Our key metric, is to bring the inventory down to their normal levels, 150mb below the OECD level.
“Convinced of the necessity to jointly cooperate to help stabilise the oil market, the Declaration of Cooperation is hereby amended to take effect for the whole of January to December, 2018,” he said.
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al-Falih said the meeting had also witnessed six smaller producers as observers which made the total participating members at the meeting to 30, the highest number witnessed by the meeting.
“We learnt that low oil prices are equally damaging to the global economy just as the high oil prices.
“The concern is to ensure that investment are coming back to the industry due to the stability in the prices.
“We as Saudi Arabia, we are committed to ensure that the agreement is respected and achieve high level and compliance by members.”
Also, the Russian Energy Minister, Mr Alexander Novak, said a consensus was reached to extend the cut because they were entering low oil demand season so it was important to reach a decision to ensure market stability.
“We are still far away from reaching our goals, but we all spoke in favour of the extension till 2018,” he said.
This is the third time the two groups have reached agreement to cut production in order to ensure market rebalancing.
As a result of the cut deal last year and the corporation between the two groups, the prices of oil improved by nearly 20 per cent on average to reach 51.67 dollars per barrel on OPEC reference basket.
In summary, Saudi Arabia is expected to still make the largest contribution by cutting its crude oil production by 486,000 b/d.
Also, Algeria is expected to continue to reduce its output per day by 50,000, Angola, 87,000, Ecuador, 26,000, Gabon, 9,000, Iran, 90,000, Iraq, 210,000, Kuwait, 131,000, Qatar, 30,000, UAE, 139,000 and Venezuela by 95,000.
Non-OPEC producers would again continue to contribute a reduction of under 600,000 bpd.
Analysts believe that one of OPEC’s biggest problems while cutting supplies has been rising U.S. output, which is gaining global market share and undermining the group’s efforts to tighten the market.
U.S. oil production hit a new record of 9.68 million barrels per day last week, which is up from 8.5 million bpd at the end of last year, before the cuts were implemented.
Analysts predict that U.S. oil production will reach 9.9 million bpd in December, which would bring it close to top producers like Russia and Saudi Arabia.
