OPEC and several non-OPEC members are meeting on Thursday in Vienna to discuss further strategy on oil production.
To remind, 13 OPEC members and 11 Non-Opec members (most notably Russia) in December last year agreed to cut oil output by 1.8 million barrels a day in order to stabilize oil prices.
The cuts started taking effect in January 2017, leading to a relatively stable oil price of around $50 a barrel, an increase from 2016 lows of below $30.
It has been said that further cuts, if agreed upon, might last for six months, however, at a meeting on Wednesday, the Joint OPEC-Non-OPEC Ministerial Monitoring Committee (JMMC) recommended the cuts be extended for nine more months.
The JMMC said that as of April 2017, the OPEC and participating non-OPEC producing countries achieved „an impressive conformity level of 102 per cent,“ an increase of 4 percentage points over the March 2017 performance.
“This is a demonstration of the commitment of participating countries to continue their cooperation until the achievement of the goal of rebalancing the market,“ the JMCC said.
JMMC then recommended further cuts which would last nine months, starting July, saying it was necessary to prolong the production adjustments due to the current market conditions, including the level of global inventories.
Focus on drawing down inventories
Giving his opening address to the 172nd Meeting of the OPEC Conference on Thursday, Khalid A. Al-Falih, Saudi Arabia’s Minister of Energy, Industry and Mineral Resources, and President of the OPEC Conference said: “Since our last meeting in November, the oil market situation has markedly improved. We started with a bearish sentiment, but the market is now well on its way toward rebalancing. We have more work to do in lowering inventories toward the last five-year average, but we are on the right track.”
“At today’s meeting, we will review the developments of the past six months, as well as the market outlook for the remainder of 2017 and beyond, as we consider our posture going forward.
The main focus for today remains on consolidating, strengthening and accelerating the process of rebalancing, alongside the important task of drawing down global oil inventories.
Together with our partners among participating non-OPEC countries, we will continue to monitor the health of the oil market and the wider global economy, and examine ways to accelerate recovery and return the market to its normal condition.” Al Falih said.
Michael Burns, oil and gas partner at law firm Ashurst commented: “It no longer seems to be a question of whether there will be an extension of the cuts to production, but how long that extension will be. A nine months extension seems to be the consensus view but what about the possibility of a deeper level of cuts? That is not beyond all possibility.”
Offshore Energy Today Staff