Vienna, Austria. Sept 22nd: Ministers from the Organisation of Petroleum Exporting Countries (OPEC), Russia and other producers will meet in Vienna today to consider extending an agreement to reduce output by about 1.8 million barrels per day (bpd). On the eve of the gathering OPEC and its allies indicated that they’ll wait a bit longer to see if further action is required in their bid to clear a global oil glut
Oil prices were largely up yesterday as traders waited to see whether oil- producing countries set to meet in Vienna, Austria would extend production limits to reduce the global crude glut.
The brent crude was trading at $56.29 dollars a barrel. U.S. crude was 50.64 dollars.
Many analysts expected them to extend the current deal that will last till March, but many also said prices at current levels could encourage some countries to boost production.
The OPEC and non-OPEC nations meeting will discuss a possible extension of an oil supply cut deal to support prices and will consider monitoring exports to assess compliance.
The organisation aims to clear a global oil supply glut by curbing output by about 1.2 million barrels per day (bpd). Russia and other non-OPEC producers agreed to cut half as much. The pact runs to the end of March.
Ministers on a panel monitoring the deal, which comprises Kuwait, Venezuela and Algeria, plus non-OPEC producers Russia and Oman, are scheduled to meet at 0800 GMT on Friday in Vienna.
Oil prices have gained more than 15 percent in the past three months to trade above $56 a barrel, suggesting the deal is making progress in getting rid of excess supply. But oil is still half the level it was in mid-2014.
Kuwaiti Oil Minister Essam al-Marzouq said on Thursday compliance with output cuts was improving and was above 100 percent. “It is very good, better than last month,” the minister told reporters after arriving in Vienna.
A technical committee of OPEC and non-OPEC states that met on Wednesday said compliance in August was 116 percent of their pledged oil output cuts, three sources said. That is up from 94 percent in July.
Algeria’s Energy Minister Mustapha Guitouni said on Wednesday OPEC would discuss extending the deal with non-OPEC producers. He did not comment on arrival in Vienna on Thursday.
Nigeria’s Minister of State for Petroleum Resources, Dr Ibe Kachikwu, earlier told journalists in Abuja, that at the expiration of Nigeria’s crude-cut exemption in March, 2018, Nigeria would seek an extension from the Organization of Petroleum Exporting Countries (OPEC).
After enjoying the facility twice, Dr Ibe Kachikwu insisted that further exemption was inevitable. He said that it was magnanimous of his OPEC colleagues to have understood that the government came in with difficulties and voluntarily gave the exemption but that market stability was an issue.
Ibe Kachikwu said that OPEC had no intention of giving an extension and taking it back, but ”I have obviously a mark of March, next year; if I need to draw it up to that point, I will. If my numbers are not showing stability (but if we are fine before then) and stability arises (but this is already September so March is really six months). It’s very unlikely that I can see stability that convinces me with certainty and predictability that I should exit the exemption between now and March.”
He commended Saudi Arabia, saying he had learnt a lot from the country’s willingness to have a conversation in terms of increasing more cuts even though it sacrificed the most in crude cuts.
On the crude cuts, he said, there was enough incentive to want to keep doing it as it had put crude price in the $50 bracket as against $20 previously. He also forecast that prices would not fall but be around $55 per day by year end.
Nigeria was first exempted for six months and the second time, for nine months, in OPEC’s decision to cut crude production to shore up prices of the product.
Libya and Nigeria are exempt from OPEC’s landmark production cut agreement, and their recovery over the past few months had led to talks among the coalition on whether the two should be asked to join in on the cuts, although Libya’s setback in August may quell some of that discussion.
Photo: OPEC offices
Representatives from Libya and Nigeria have been invited to the September 24 meeting of the OPEC/non-OPEC monitoring committee overseeing the deal to explain their production outlooks. The two members’ combined August average output was 480,000 b/d above their level in October, the benchmark month from which OPEC based its production cuts and quotas.
The agreement, which went into force January 1, calls on OPEC and 10 non-OPEC producers, led by Russia, to cut a combined 1.8 million b/d in output through March 2018 in order to rebalance the market and induce draws of oil in storage.
OPEC’s collective output for August is about 630,000 b/d above its declared ceiling under the deal of about 31.9 million b/d, when Equatorial Guinea, which joined in May, is added in and Indonesia, which suspended its membership in December, is subtracted.