VIENNA, Nov 29, (Agencies): Kuwait Oil Minister Essam Al-Marzouq said Tuesday a ministerial market monitoring committee would examine oil output levels for October and producers’ commitment to production cuts, then refer recommendations to an OPEC meeting.
Ministers from OPEC and non-OPEC will thoroughly discuss on Thursday whether to extend production cuts or not, said Al-Marzouq, also Minister of Electricity and Water.
Any decision will serve interest of the oil producers and consumer, and maintains oil market stability, Al-Marzouq told KUNA following his arrival in Vienna for the meetings.
He however said there was a general agreement among the 24 signatories to extend the production cut agreement following its expiration end of next March. Al-Marzouq said non-OPEC Russia would join the ministerial meeting on Thursday.
Meanwhile, Iraqi Oil Minister Jabbar Al-Luaibi told KUNA Baghdad supported the production cut agreement. He said Iraq was satisfied with the current oil prices.
Oil prices, meanwhile, dipped on Tuesday in nervousness ahead of a meeting of crude producers at OPEC headquarters in Vienna to discuss extending output cuts.
Brent Crude fell 43 cents to $63.41 in London while in New York fellow benchmark West Texas Intermediate (WTI) fell 30 cents to $57.81.
Until now market expectations have been for 24 oil producers to prolong their 2016 deal on Thursday reducing output by 1.8 million barrels per day until the end of 2018.
But reports said that non-OPEC member Russia has misgivings, fearing that oil prices above $60 a barrel will allow rivals in the United States, who are outside the accord, to extract more oil and steal market share.
The deal among the OPEC and non-OPEC countries, first struck a year ago and which has already been extended until March 31, has borne fruit.
It has helped to reduce a global glut that had sent oil prices plummeting to less than $30 per barrel, tearing a hole in producers’ public finances.
Oil prices are now at a near two-year high, with Brent Crude close to $65 per barrel and WTI recovering to over $60.
Inventories have also fallen to more normal levels. Growing optimism about the global economy and its effect on buoying oil demand, not least from China, has also helped.
“The current market conditions, the returning level of confidence and optimism in the industry are all evidence of the outcome of our joint efforts,” Mohammad Sanusi Barkindo, OPEC secretary general, said on Monday.
According to Bloomberg News, members of the OPEC cartel and Russia have crafted the outline of an agreement to extend the curbs to the end of 2018.
Saudi Arabia is thought to be particularly keen since higher oil prices would help boost the value of national oil company Saudi Aramco, some of which it wants to sell next year.
OPEC and Russia are still hammering out crucial details, however, Bloomberg reported.
In September, Russian Energy Minister Alexander Novak suggested it was premature to discuss an extension, saying he wanted to wait until January for further data.
Kuwait too until recently was insisting that extension should be delayed until early next year, hoping the outlook would be clearer, Bloomberg said.
“We support an extension, we haven’t agreed on a target yet,” Kuwait’s Oil Minister Issam Almarzooq said as he arrived on Tuesday at his plush Viennese hotel.
“Depends on what the scenarios will be.” A further possible complication could be the dramatic recent deterioration of relations between regional rivals Saudi Arabia and Iran, both members of OPEC.
Saudi Arabia’s Crown Prince Mohammed bin Salman last week called Iran’s supreme leader “the new Hitler of the Middle East”.
Iran, following the lifting of sanctions under the 2015 nuclear deal, was allowed a moderate increase in oil production under the producers’ accord.
For one of OPEC’s founder members meanwhile, things are far from rosy. Venezuela, whose oil reserves are the world’s biggest, is a whisker away from an all-out debt default.
Just when the South American country needs foreign currency more than ever, oil output is forecast to fall to a near 30-year low in 2018.
OPEC and Russia look set to prolong oil supply cuts until the end of 2018 this week while signalling that they may review the deal when they meet again in June if the market overheats.
With oil prices rallying above $60 per barrel, Russia has questioned the wisdom of extending existing cuts of 1.8 million barrels per day (bpd) until the end of next year as such a move could prompt a spike in US production.
Russia needs much lower oil prices to balance its budget than OPEC’s leader Saudi Arabia, which is preparing a stock market listing for national energy champion Aramco next year and would hence benefit from pricier crude.
Six ministers from OPEC and non-OPEC oil producers including Saudi Arabia and Russia were meeting in Vienna on Wednesday — one day ahead of a full OPEC gathering — to review recommendations by their delegates.
On Tuesday, a joint OPEC/non-OPEC committee recommended extending cuts until the end of 2018 with an option of reviewing the arrangement at the next OPEC meeting in June, three sources from the Organization of the Petroleum Exporting Countries said.
“In reality it would be only a three-month true extension with the review in June,” said Olivier Jakob from Petromatrix consultancy. The existing cuts expire in March.
Benchmark Brent and US crude prices declined on Wednesday for a third consecutive day although Brent remained above $63.
United Arab Emirates Energy Minister Suhail bin Mohammed al-Mazroui said on Tuesday that cutting output through all of 2018 was still the main, but not only, scenario.
Iraqi Oil Minister Jabar al-Luaibi told reporters on Wednesday he also supported a nine-month extension.
Saudi Energy Minister Khalid al-Falih told the opening of the monitoring meeting on Wednesday that cuts needed to be extended as the rebalancing of oil markets was not yet complete.
Novak told reporters after meeting Falih: “We understand that we need to take further steps to rebalance the market … We have a common understanding (with Falih).”
Two sources familiar with OPEC talks said the group may debate capping Nigerian and Libyan output at 1.8 million bpd and 1 million bpd respectively, having exempted the two countries so far due to unrest and lower-than-normal production volumes.
The production cuts have been in place since the start of 2017 and helped halve an excess of global oil stocks although those remain at 140 million barrels above the five-year average, according to OPEC.
Russia has signalled it wants to understand better how producers will exit from the cuts as it needs to provide guidance to its private and state energy companies.
“It is important … to work out a strategy which we will follow from April 2018,” Novak told the monitoring committee.
Iraq’s Luaibi said there had been little discussion so far on any exit strategy.
Some Russian producers including Rosneft, run by an ally of President Vladimir Putin, Igor Sechin, have questioned the rationale of prolonging the cuts, saying it will lead to a loss of market share to US firms, which are not reducing output.
OPEC, which comprises 14 countries, has traditionally been much less worried about exit strategies as its members have been known for reducing compliance and cheating on their quotas towards the expiry of such deals.
“Russia seems to be pushing OPEC to have a concrete plan to phase out the cuts when appropriate … compared to the typical undisciplined OPEC strategy,” US bank Tudor, Pickering, Holt & Co, which is active in the shale industry, said.
The United Arab Emirates energy minister said on the eve of a meeting of OPEC and its allies on extending an oil production cap that he is hopeful a deal will be reached.
“I am optimistic that this group of committed countries will come up hopefully on Thursday with a decision that is good for the market,” UAE Energy Minister Suhail al-Mazrouei said Wednesday in Vienna.
Twenty four countries agreed at the end of last year to limit their crude output, which has led to a recovery of oil prices that fell under $30 per barrel at the beginning of 2016.
The deal that reduced production by 1.8 million barrels per day has already been given more time once, and discussions are about extending it beyond March 2018.
Mazrouei, who met with his Saudi and Kuwaiti counterparts earlier on Wednesday, did not comment on his discussions.
Gulf nations traditionally meet ahead of OPEC meetings to agree a common policy.
“We need to meet, there’s nothing I can tell you now. We need to wait for the meeting,” he told journalists, referring to the important technical meeting to be held on Wednesday afternoon.
That meeting involving ministers from several nations, including major producers Saudi Arabia and Russia, was due to give a recommendation for the main gathering on Thursday.
Saudi Arabia may have difficulty, however, in convincing Russia to agree to extend the production cuts to the end of 2018, as Moscow has made it known it feels the rise in the price of oil is mostly benefitting US companies.
Uncertainty over Russia’s position was weighing on the price of oil, with the main international contract, Brent, down 16 cents to $63.08 a barrel around 1200 GMT.