OPEC and other countries that agreed to cut crude production are converging on the need to extend the pact beyond June to help clear a supply glut, Saudi Arabia's OPEC governor said on Friday.
OPEC and other countries that agreed to cut crude production are converging on the need to extend the pact beyond June to help clear a supply glut, Saudi Arabia’s OPEC governor said on Friday. The Organization of the Petroleum Exporting Countries, Russia and other producers agreed last year to curb production by 1.8 million barrels per day (bpd) for six months from Jan. 1.
But while oil prices have risen stockpiles are still high and production from countries that have not agreed to the cut, including the United States, has been rising, keeping crude below the $60 level that OPEC kingpin Saudi Arabia and others would like to see. “There’s an emerging consensus among participating countries on the need to extend the production agreement reached last year,” Adeeb Al-Aama told Reuters.
“Based on today’s data, there’s a growing conviction that a six-month extension may be needed to rebalance the market, but the length of the extension is not firm yet,” he said. A formal decision will be made when OPEC ministers meet on May 25. OPEC will also meet the non-OPEC countries in Vienna on May 25.
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The Saudi OPEC governor was talking by phone from Vienna where he is attending a meeting of OPEC’s governing board along with his counterparts from the 13-country OPEC – which accounts for a third of global oil production. Such meetings are an occasion to consult informally, but they deal with administrative matters and do not decide policy.
Al-Aama said he had accompanied Saudi Energy Minister Khalid Al-Falih on a visit last week to some of the non-OPEC producers that are party to the pact, and “all have expressed their commitment to the deal.” Al-Falih was due to visit more countries next week, he added. Compliance with the cuts has been rising every month, reaching “an impressive 98 percent in March”, Al-Aama said. This is higher than OPEC achieved during its last cut in 2009.
Al-Falih also spoke with Russian Energy Minister Alexander Novak on Thursday, Al-Aama said. “The two ministers expressed their satisfaction with the market fundamentals evidenced by the gradual drawdown of global inventories and agreed on the need to continue working with all participants to guide oil markets towards rebalancing,” he said. Novak has said Russia is inclined to prolong the accord.
(Reporting by Rania El Gamal; editing by Jason Neely and Susan Thomas)