OPEC, non-OPEC to look at
extending oil-output cut by six months
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[March 27, 2017]
By Vladimir Soldatkin and Rania El Gamal
(Reuters) - A joint committee of ministers from OPEC and non-OPEC oil
producers has agreed to review whether a global pact to limit supplies
should be extended by six months, it said in a statement on Sunday.
An earlier draft of the statement had said the committee "reports high
level of conformity and recommends six-month extension".
But the final version said only that the committee had requested a
technical group and for the OPEC Secretariat to "review the oil market
conditions and revert ... in April, 2017 regarding the extension of the
voluntary production adjustments".
Oil sector analysts said the lack of an immediate extension could drag
on crude prices.
"The dropping of the recommendation to extend cuts in favor of technical
review committee is likely to lead to a lot of disappointment and
potential further liquidation of long positions by money managers that
will put downward pressure on oil prices," said Harry Tchilinguirian,
head of commodities strategy at BNP Paribas in London.
It was not immediately clear why the wording had been changed, although
a senior industry source said the committee lacked the legal mandate to
recommend an extension.
The Organization of the Petroleum Exporting Countries and rival
oil-producing nations were meeting in Kuwait to review progress with
their global pact to cut supplies.
OPEC and 11 other leading producers including Russia agreed in December
to cut their combined output by almost 1.8 million barrels per day (bpd)
in the first half of the year. The original deal was to last six months,
with the possibility of a six-month extension.
"Any country has the freedom to say whether they do or they don't
support (an extension). Unless we have conformity with everybody, we
cannot go ahead with the extension of the deal," Kuwaiti Oil Minister
Essam al-Marzouq said, adding that he hoped a decision would come by the
end of April.
The oil ministerial committee "expressed its satisfaction with the
progress made towards full conformity with the voluntary production
adjustments and encouraged all participating countries to press on
towards 100 percent conformity," the statement said.
The December accord, aimed at supporting the oil market, has lifted
crude <LCOc1> to more than $50 a barrel. But the price gain has
encouraged U.S. shale oil producers, which are not part of the pact, to
The committee said it took note that certain factors, such as low
seasonal demand, refinery maintenance and rising non-OPEC supply had led
to an increase in crude oil stocks. It also observed the liquidation of
positions by financial players.
"However, the end of the refinery maintenance season and noticeable
slowdown in U.S. stock build as well as the reduction in floating
storage will support the positive efforts undertaken to achieve
stability in the market," it said.
It asked the OPEC Secretariat to review oil market conditions and come
back with recommendations in April regarding an extension of the
[to top of second column]
Kuwait Oil Minister Ali Al-Omair opens OPEC 2nd Joint Ministerial
Monitoring Committee meeting in Kuwait City, Kuwait, March 26, 2017.
reaffirms the commitment of OPEC and participating non-OPEC countries to
continue to cooperate," the statement said.
Russian Energy Minister Alexander Novak said it was too early to say whether
there would be an extension, although the agreement was working well and all
countries were committed to 100 percent compliance.
Olivier Jakob, of oil consultancy Petromatrix, said that with the revision of
the ministerial committee's statement, it was becoming more difficult to know
who was responsible for what in OPEC.
is not the best option to provide clarity to the oil markets," Jakob said.
Ellen Wald, a consultant on the global energy industry, said: "I think the
market will react negatively to the lack of a clear direction on a rollover for
Before the meeting, Iraqi Oil Minister Jabar Ali al-Luaibi told reporters there
were some encouraging elements that suggested the oil market was improving, and
that if all OPEC members agreed measures to help price stability, Iraq would
support such steps.
"Any decisions taken unanimously by members of OPEC ... Iraq will be part of the
decision and will not be deviating from this," Luaibi said.
Iraq's oil production is running at 4.312 million bpd this month, Luaibi said,
adding that his country had cut its oil exports by 187,000 bpd so far and would
reach 210,000 bpd in a few days.
Compliance with the supply-cut deal was 94 percent in February among OPEC and
non-OPEC oil producers combined, Russia's Novak said.
Russia is committed to cuts of 300,000 bpd by the end of April, Novak said.
Novak said he expects global oil stockpiles to decrease in the second quarter of
"The dynamics are positive here, I believe," Novak said, adding that inventories
in the United States and other industrialized countries had risen by less than
in the past.
Kuwait's oil minister said the market may return to balance by the third quarter
of this year if producers comply fully with their production targets.
"More has to be done. We need to see conformity across the board. We assured
ourselves and the world that we would reach our adjustment to 100 percent
conformity," Marzouq said.
(Reporting by Rania El Gamal, Vladimir Soldatkin, Ahmed Hagagy; Additional
reporting by Christopher Johnson in London; Editing by Dale Hudson and Catherine
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