The extension by another six months of the OPEC/non-OPEC oil output deal is more likely to happen, as Saudi Arabia and Kuwait strongly signaled Thursday consensus is growing among oil producers.
Saudi energy minister Khalid al-Falih told reporters on the sidelines of a conference a preliminary agreement to extend had been reached, but a final sign-off is still needed, Kallanish Energy understands.
“There is consensus building, but it’s not done yet,” he said. “We are talking to all countries. We have not reached an agreement for sure, but the consensus is building.”
Kuwait’s oil minister, Essam al-Marzouq, also said he expected to see an extension of the agreement through the second half of the year. He added if OPEC and non-OPEC decide to extend, the cuts may become less deep as oil demand is expected to be stronger for seasonal reasons in the second half of 2017.
“We have a noticeable increase in compliance from non-OPEC, which shows the importance of extending the agreement,” Marzouq said, at the same event. “Russia is on board preliminarily … Compliance from Russia is very good. Everyone will continue on the same level.”
Another OPEC member, Oman, said a “quite high” number of producers supported the move. “The number of countries that are supporting the extension I think would be quite high, percentage-wise,” Omani oil minister Mohammad al-Rumhy told reporters.
Meanwhile, Iraq welcomed the deal extension as long as it is exempt from the cuts and allowed to boost its own production. “Given these sensitive circumstances, it is the right of Iraq to hope for an exemption by the other OPEC member states and have an opportunity to increase its production,” Shi’ite ruling coalition leader Ammar al-Hakim told Reuters Wednesday.
OPEC and non-OPEC producers agreed in December to cut their crude production by a combined 1.8 million barrels per day (MMBPD) in the first six months of 2017. The deal, aimed at supporting higher oil prices by reducing the oil supply glut, may be extended from June to December. OPEC members will meet on May 25 in Vienna to discuss this option.
Crude oil futures were trading pretty much flat Thursday, with Brent at $53.09 per barrel and WTI at $50.58/Bbl at 16:00 GMT. Oil prices saw a steep loss on Wednesday weighed down by rising U.S. production.