Novak: Too early to talk extension of OPEC output cut deal

OPEC output cut amounts to about 1.8 million b/d

Russian Energy Minister Alexander Novak says it is too early to say if the OPEC output cut agreement will be extended, but he adds it is a possibility during an interview with Reuters.

In December, Russia joined a majority of OPEC producers and 11 other countries in a six-month deal that would see global oil production cut by about 1.8 million b/d.

As part of the agreement, Russia pledged to cut 300,000 b/d each month, however, reports released on Thursday showed in February, Russia only decreased its output by 100,000 b/d.

The OPEC output cut deal runs out in June and may be extended if global crude inventories do not drop to near the five-year average.

OPEC meets again on May 25 in Vienna, Austria.

During his interview with Reuters, Novak said “It is premature to talk of what we will discuss in April-May. The technical possibility of the deal extension is envisaged by the agreements.”

According to Novak, further action would depend on output by producers that did not join the pact, including the US, China and Norway.  Increased production by those countries would add to the supply and demand imbalance.

At the end of December, the EIA reported stocks of crude, natural gas liquids and oil products held by OPEC member countries had fallen below 3 billion barrels, however, the inventory was still 286 million barrels above the five-year average.

Meanwhile, stocks in China and volumes of oil stored at sea continued to increase.

Novak predicted an increase in US production between 400,000 b/d and 500,000 b/d in 2017, higher than a previous estimate of a 300,000 b/d to 400,000 b/d increase.

According to Reuters, if the OPEC output cut deal is not extended, Russian oil output could rise to 11.01-11.07 million b/d.

Novak says he believes average Brent oil prices for 2017 will be between $55-60/barrel.