Opec May Need to Extend Oil Cuts Until the End of 2019

As global inventories are still rising, the Organization of the Petroleum Exporting Countries (OPEC) may need to expand output cuts into the second half of 2019, Saudi Minister of Energy, Industry and Mineral Resources Khalid al Falih said Sunday during a press conference in Azerbaijan.

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The Saudi minister’s comment took place during the 13th meeting of the Joint OPEC-non-OPEC Ministerial Monitoring Committee (JMMC) that is being held from March 17 to 18 in the Azeri capital, Baku. The JMMC comprises ministers of six countries: Russia, Saudi Arabia, Kuwait, Venezuela, Algeria, and Oman, whose task is to review market development scenarios and make recommendations for OPEC+ countries regarding the necessary actions.

In December 2018, the block and allies led by Russia agreed to cut oil production by 1.2 million barrels per day (bpd) starting January 2019, to help rebalance the global oil market and prop up prices, despite pressure from the U.S. to not decrease global oil supply.

The OPEC nations agreed to lower its production to 800 million bpd while its external allies to support with an additional cut of 400 million bpd. During the meeting, al Falih expressed that  “the job still remains ahead of us... We are still seeing inventory builds... We need to stay the course certainly until June,” date agreed upon back in 2018.

According to secondary sources, total OPEC-14 preliminary crude oil production averaged 30.55 million bpd in February, a decrease of 221,000 bpd over the previous month. Crude oil output decreased mostly in Venezuela, Saudi Arabia, and Iraq, while production inched up in Libya and Angola. However, an increase in the non-OPEC supply of 65,000 bpd, compared with the previous month, was mainly driven by the U.S., U.K., and Brazil. 

Bloomberg reported that in February the level of compliance with the oil output cut deal reached 89% compared with 83% in January. Yet the figure will be officially announced on Monday. 

However, a steeply increase in recent months from the U.S’s oil exports, while imposing sanctions on Venezuela and Iran to reduce their shipments to global markets, are “are creating negative trends in the market and are completely distorting the supply and demand picture”, as Russian Energy Minister Alexander Novak said Sunday.

The Russian Minister added that it was hard for Moscow and OPEC to plan due to the U.S. sanctions, as “they are imposed to help sell goods of the country that is imposing the sanctions, and they create uncertainty.”

In Baku, Venezuelan Oil Minister Manuel Quevedo reaffirmed the country's support for the “stability of the oil market”, and that oil exists for the development of the people around the world. The next meeting will be held in April in Austria.