Opec may not need to extend a six-month agreement with non-Opec members to pare oil output because demand is rising and compliance with cuts is high, the Saudi oil minister said on Monday.
Opec agreed in November to trim output by some 1.2 million barrels per day (bpd) starting this month and some members including Saudi Arabia and Kuwait have pledged to outdo their commitments and pare some more barrels, helping prices to rally.
Non-Opec members led by Russia have also agreed to cut output by 558,000 bpd, the first such collaboration between Opec and non-Opec countries since 2001.
“We don’t think it’s necessary, given the level of compliance we have seen and given the expectations of demand,” said Khalid Al Falih at the World Future Energy Summit in Abu Dhabi.
“My expectation, and I believe it’s been corroborated by the IEA, is that the rebalancing which started slowly in 2016 will have its full impact by the first half. Of course there are many variables that can come into play between now and June and at that time we will be able to reassess. “
International benchmark Brent was down 0.2 per cent at $55.36 per barrel in London afternoon trading. “Once we get close to the 5-year average of global stocks and inventories, we will basically lift our foot from brakes so to speak and let the market do its thing,” said Mr Falih.
Opec will meet in May to discuss production plans but a monitoring committee that is charged with developing a mechanism to ensure compliance with Opec and non-Opec cuts will convene on January 22 at Opec headquarters in Vienna.
“All players have indicated their willingness to extend if necessary,” said Mr Al Falih. “Demand is going to pick up in the summer and we want to make sure the markets continue to be supplied well, we don’t want to create a shortage or a squeeze, so the extension will only happen if there’s a need and if there’s a a need we will do it. “
Saudi Arabia is currently pumping less than 10 million bpd, exceeding its commitment for cuts.
Opec in November ended a two-year policy of protecting its market share rather than propping up prices, which have lost half of their value since mid-2014 amid a supply glut.
dsaadi@thenational.ae
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