Oil minsters for the three countries commented on Sunday, a day after Algeria’s Energy Minister Noureddine Boutarfa called for an extension because he said the strategy is 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.
“It does make sense to extend the agreement for another six months,” said Mohammed al Rumhy, Oman’s Minister of Oil and Gas.
“We are ready to support” prolonging the six month deal, which took effect in January, Venezuela’s Oil Minister Nelson Martinez told reporters on Sunday before the meeting. Oman, unlike Venezuela, isn’t a member of the Organization of Petroleum Exporting Countries (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 before the meeting. Russia will target its pledged reduction of 300,000 barrels a day by the end of April, he said.
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 per cent 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 May 25 in Vienna to decide whether to extend the deal. Brent crude futures closed on Friday at US$50.80 a barrel in London, down 96 cents, or 1.9 per cent, for the week. The benchmark grade has dropped 11 per cent in 2017 and reached a low for the year of US$49.71 a barrel on March 22.
The joint ministerial monitoring committee, comprising three OPEC members and two producers outside the group, will discuss the possibility of prolonging the cuts beyond June, Novak said. With US crude stockpiles swelling to record levels and prices sinking below US$50 a barrel, OPEC and its partners have little choice but to keep going, according to all 13 analysts surveyed by Bloomberg.
Oil inventories are high because of low US demand and higher supply, and the market should re-balance in the second half of the year, OPEC secretary-general Mohammad Barkindo told reporters in Kuwait. Inventories in countries in the Organisation for Economic Co-operation and Development are currently 282mn barrels higher than their five year average, he said at the meeting on Sunday.
It’s too early to decide on an extension of the output cuts, and OPEC will take up the issue in May, Barkindo said at Sunday’s meeting, during which ministers will monitor compliance with the targeted reductions.