The Organization of the Petroleum Exporting Countries (OPEC) and non-cartel producers, which are part of the oil output cut agreement, plan to work out parameters for easing the oil cuts within a month, Russian Energy Minister Alexander Novak told state media Saturday – at the St. Petersburg International Economic Forum (SPIEF) .
“We can see at the moment that the agreement which is valid until the end of 2018 gives us a possibility to slightly change the reduction policy… We may consider partially lowering the quotas we agreed on… We would not want to give the numbers right now, we have agreed to work on this issue additionally within a month, to analyze the current situation very carefully and find some parameters,” Novak said.
The minister added that one of the options was to go back to the quotas that were agreed on when the deal was first signed. He also said that average oil price in 2018 would be at $65-75 per barrel.
At the same time, Novak noted that the decrease in Iranian oil output would not exceed 10 percent.
“I believe that the reduction of [Iranian] oil output over sanctions will be less significant than it was predicted – about 10 percent. This is probably the maximum level,” Novak said.
The minister also noted that when sanctions against Iran oil deliveries had been in effect, Tehran was shipping its oil to Asia-Pacific countries.
A day earlier, on friday, the energy ministers of Saudi Arabia and Russia said Riyadh and Moscow are prepared to ease output cuts to calm consumer worries about supply adequacy, with Saudi Arabia’s Khalid al-Falih adding that any such move would be gradual so as not to shock the market.
Saudi Arabia and Russia said they are discussing raising OPEC and non-OPEC Crude Oil production by 1.8 million BPD.
OPEC’s Secretary-General Mohammad Barkindo said a complaint from US President Donald Trump over high prices triggered the plan to expand Crude Oil output. OPEC began a discussion about easing production cuts following a critical Tweet from President Trump, Barkindo said.
Raising production would ease 17 months of strict supply curbs amid concerns that a price rally has gone too far, with ICE Brent Crude Oil having hit its highest since late Y 2014 at 80.50 bbl.
President Trump Tweeted last month that OPEC had “artificially” boosted Crude Oil prices.
“We pride ourselves as friends of the United States,” SG Barkindo told a panel with the Saudi and Russian energy ministers in St. Petersburg at Russia’s main economic forum.
The Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia have agreed to curb output by about 1.8 million BPS through 2018 to reduce global stocks, but the inventory overhang is now near OPEC’s target.
In April, pact participants cut production by 52% more than required, with falling output from crisis-hit Venezuela helping OPEC deliver a bigger reduction than intended.
An increase of about 1.8 million BPD would lower compliance to 100% of the agreed level.
Crude Oil prices fell more than 2% towards 77 bbl Friday as Saudi Arabia and Russia said they were ready to ease supply curbs.
Russian Energy Minister Alexander Novak said current cuts were in reality 2.7-M bbl due to a drop in Venezuelan production, around 1-M bbl higher than the initially agreed reductions.
Talks are being led by the energy ministers of Saudi Arabia and Russia at St. Petersburg this week along with their counterpart from the United Arab Emirates, which holds the OPEC presidency this year.
OPEC and non-OPEC ministers meet in Vienna on 22-23 June and the final decision will be taken there.
OPEC may decide to raise Crude Oil output as soon as June due to worries over Iranian and Venezuelan supply and after Washington raised concerns the Crude Oil rally was going too far, OPEC and oil industry sources told Reuters early this week.
The rapid decline in oil inventories and worries about supplies after the U.S. decision to withdraw from the international nuclear deal with Iran, as well as Venezuela’s collapsing output, were reportedly the catalyst for OPEC’s latest direction.
On May 8, US President Donald Trump announced his decision to withdraw the United States from the 2015 Iran nuclear agreement. Trump also announced that he would reinstate US sanctions related to Iran’s nuclear program.
The SPIEF, held annually in Russia’s second largest city of St. Petersburg, is a major global platform for communication between business representatives and the discussion of crucial economic issues. Over 17000 participants from 143 countries took part in the 2018 St.Petersburg International Forum – a total of 550 agreements worth $38 bln were signed at SPIEF this year