Suhail Al Mazrouei, the Energy Minister, said on Tuesday that Opec ministers still have to agree on the key terms of any extension to its output restraint deal, including how long to extend and whether or not the group should make deeper cuts to help balance the oil market more quickly.
The minister was speaking in Abu Dhabi before travelling to Vienna for tomorrow’s crucial Opec meeting, at which ministers will consider the progress of their efforts over the past five months.
“We see the logic of an extension,” Mr Al Mazrouei said on the sidelines of an EIC Connect conference in the capital for UK oil companies.
“But what is that period? Is it six months, is it nine months? We need to discuss, and for us to make a decision we need a unanimous agreement.”
During the deal’s first five months, oil prices have mostly traded about 10 per cent to 15 per cent above last year’s average, at between US$50 a barrel and $55 a barrel for world benchmark North Sea Brent.
But higher prices have encouraged a quick return of US production, which has slowed the reduction of the huge oil world oil stockpile and left a dilemma for Opec and the 11 non-Opec producers that have joined their deal.
Saudi Arabia’s energy minister, Khalid Al Falih, and Alexander Novak, his counterpart from Russia, the main non-Opec partner, have been lobbying for an extension to the end of March next year on the grounds that the policy is working, albeit slowly. But some other countries, including Iraq, have grown impatient at losing market share to the United States, Brazil and even hardship-exempt countries within Opec – Nigeria and Libya.
Mr Al Falih met his Iraqi counterpart, Jabar Al Luaibi, in Baghdad on Monday and won the latter’s acquiescence to a nine-month extension.
But another unresolved issue is Iran, which effectively has been exempt from restraint as its ceiling under the deal of just under 3.8 million bpd is above its current output capacity. The Iranian oil minister, Bijan Zanganeh, has spoken little in recent weeks other than to voice general support for an extension, though Iran has in the past argued it should be allowed to return to the production level before nuclear sanctions were imposed, of more than 4 million bpd.
“Iran has a number,” said Mr Al Mazrouei. “Yes, it was an increase, but that was the number … If we are extending [the deal] you would think it would be at the same conditions as the previous six months.
“I think we have seen good signs for support from the majority of the members who have spoken up,” the minister said. “But you cannot get a 100 per cent decision prior to the meeting. That is a sovereign right of every member. Prior to that no one can tell you for sure what is the decision.”
He said that he expects there will be a bigger reduction in world oil inventories in the second half of this year but that the target is to bring those stocks down to the historical five-year average, which is still some way off.
Asked about talk of deepening the cuts, the minister said: “What we do is the result of what the market needs,” adding that “the cuts as they are have been working but they need more time”.
amcauley@thenational.ae
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