Kuwaiti oil minister says OPEC cuts working, market in balance by March

Kuwait’s Oil Minister Essam al-Marzouq says the OPEC cuts are working and the global crude glut should be cleared by the end of March 2018. AFP/Getty Images photo by Yasser al-Zayyat.

OPEC cuts within range, despite increased production from Libya, Nigeria

Kuwait’s oil minister said while the world oil market is taking longer to rebalance than expected and the global oversupply glut should be cleared by the end of March 2018, making further OPEC cuts unnecessary.

Essam al-Marzouq told Reuters the cartel does not need to hold an extraordinary meeting before its scheduled summit in November because the OPEC cuts are “working well”.

Since January, OPEC along with a handful of other oil producing countries, including Russia, cut their combined production by 1.8 million barrels per day (b/d). So far, compliance with the deal has been impressive, but the original agreement had to be extended from six-months to a 18-months as the glut hung on.

Marzouq said the cartel did not expect to see a big drawdown in global inventories during the first half of 2017. “We have always been looking at the second half of the year,” he said.

US Energy Information Administration data showed US inventories in the week ending July 7 fell by 7.6 million barrels, the largest drop in 10 months.

This was proof, according to Marzouq, that the OPEC deal had “started to have an impact.”

“We are in the first two weeks of the extension period. It is too early to say now what I will do in November,” Marzouq said in an interview with Reuters, adding there was no need to deepen the cuts for now.

Marzouq said that OPEC should “wait and see what happens, at least in the next couple of weeks until the end of July, to see the compliance data and the effect on the stocks.”

On July 24, the JMMC, a joint ministerial committee, monitors compliance with the agreement. The Kuwait-headed committee will meet in St Petersburg and can make recommendations to OPEC and other producers to adjust the agreement, if necessary.

Marzouq told Reuters he feels it is too early to talk about any recommendations as far as adjusting the deal, or capping increased production from pact-exempt countries Nigeria and Libya.

OPEC’s goal is to reduce global inventories below 3 billion barrels to the five-year average of 2.7 billion. The International Energy Agency said inventories dropped in May, but were still over 266 million barrels above the average.

Oil prices have started to stabilise between $45 and $50/barrel and Marzouq says this is “what the markets see now as a fair price.” He believes prices will increase in the coming months as inventories continue to drop.