DAMMAM, Saudi Arabia, Dec 13, (RTRS): Kuwait’s oil minister said on Wednesday the oil market was expected to rebalance towards the end of 2018 and any strategy to exit a deal on supply cuts between OPEC and non-OPEC oil producers would be gradual.
“Market fundamentals have improved significantly in the last few months due mainly to the successful implementation of the agreement, and they will remain strong over 2018,” Bakheet al-Rashidi, Kuwait’s newly appointed minister, said in a statement.
He said OPEC’s meeting in June would be an opportunity to review progress made in the deal that aimed to curb an oil glut, allowing “all producers to decide about the steps that should be taken going forward.”
Meanwhile, OPEC expects the world oil market to be balanced by late 2018 as its deal with other producers to cut output reduces excess oil in storage, even as the US and other producers outside the group pump more crude.
The Organization of the Petroleum Exporting Countries, in a monthly report, cut its estimate of global demand for its crude in 2018 by 270,000 barrels per day (bpd) to 33.15 million bpd, in part because of higher US supply.
But the 14-country producer group said its oil output in November, as assessed by secondary sources, was below the 2018 demand forecast at 32.45 million bpd, a drop of about 133,000 bpd from October.
The report follows the Nov 30 decision by OPEC, Russia and several other non-OPEC producers to extend their oil output-cutting deal until the end of 2018 to finish clearing a global glut of crude that built up from 2014.
“This should lead to a further reduction in excess global inventories, arriving at a balanced market by late 2018,” OPEC said in the report.
Oil prices added to an earlier gain after the report was released to trade near $64 a barrel, close to their highest since 2015, supported by the OPEC-led effort and an unplanned shutdown of a British oil pipeline. The price of crude is still about half its level of mid-2014.
In a further sign excess supply is easing, OPEC said inventories in developed economies declined by 37 million barrels in October to 2.948 billion barrels, 137 million barrels above the five-year average.
OPEC’s stated goal is to reduce stocks to the five-year average.
OPEC’s production figures based on the secondary sources showed compliance with the supply cuts increased in November from already high rates.
Adherence by the 11 OPEC members with output targets has risen to 121 percent, according to a Reuters calculation, higher than October’s level which was still above 100 percent.
The figures that OPEC members reported themselves showed some unexpectedly large declines in production.
The UAE, which has lagged many of its peers on compliance this year, said it cut output by 50,000 bpd. The improvement in compliance comes as the country prepares to take over the rotating OPEC presidency in 2018.
Top exporter Saudi Arabia disclosed a large cut of 165,000 bpd, taking output further below its OPEC target, and Venezuela, where economic collapse is starving the oil industry of funds, reported a 118,000 bpd drop in output.
Should OPEC keep pumping at November’s level and other things remain equal, the market could move into a deficit of about 700,000 bpd next year, suggesting inventories will be drawn down further to meet demand.
Last month’s report pointed to a larger deficit of about 830,000 bpd.
Meanwhile, less than two weeks after OPEC’s decision to extend oil production cuts, Libya and Nigeria — the only two exempt members of the group — are signalling their intent to raise output next year. While several ministers at the Nov. 30 meeting of the Organization of the Petroleum Exporting Countries suggested the two nations had joined the output-curbing deal, both are working to add to their peak production from this year.
On Friday, oil company Total said its new Egina field offshore Nigeria was on track to start next year — adding 10 percent to the country’s production.
The field will have a capacity of 200,000 barrels per day (bpd) and launch in the fourth quarter of 2018, counterbalancing production constrained by ageing pipelines, perpetual theft and sabotage.
“That could certainly change the dynamics,” said Ehsan Ul-Haq, head of crude and products at Resource Economist, a consultancy.
The Nigerian petroleum ministry did not respond to a request for comment on the Egina field startup, and whether production elsewhere would be curtailed as a result.
On Saturday, the head of Libya’s U.N.-backed government met the head of Libya’s National Oil Corp (NOC) and the governor of Tripoli’s central bank to discuss how the corporation could get more cash to raise oil output next year.
The NOC received a quarter of its requested budget in 2017, hampering efforts to sustain oil output near 1 million bpd.
The developments may come as a surprise to market observers, who, after the Nov 30 meeting, believed Nigeria and Libya had agreed to participate in the OPEC agreement by imposing official caps at their peak 2017 production levels.
Meanwhile, Iraq’s Oil Ministry has added a new processing unit to the Kirkuk oil refinery, increasing the plant’s capacity to 56,000 barrels per day, the ministry said in a statement on Monday.
The new production unit can process 13,000 barrels per day of crude, the statement said, citing Oil Minister Jabar al-Luaibi.
The new upgraded production capacity will meet most of the domestic need of the northern oil city of Kirkuk and nearby provinces and “save hard currency as a result of cutting fuel imports”, it said.
Iraq is working to divert most future output from Kirkuk oilfield to local refineries due to an ongoing conflict with Kurdish regional authorities over the use of an export pipeline to Turkey.
Production from Kirkuk stopped in mid-October after Iraqi forces dislodged Kurdish fighters and took over the northern region’s oilfields.