OPEC supply cut deal needs to be extended: Saudi governor

Saudi Arabia’s Energy Minister, Khalid al-Falih is working to convince OPEC supply cut participants to extend the pact to the end of the year. Khalid al-Falih Twitter photo.

OPEC supply cut deal likely to be extended beyond June

Adeeb Al-Aama, Saudi Arabia’s OPEC governor, said the cartel and some non-OPEC countries participating in the OPEC supply cut are close to agreeing to extend the pact to the end of the year.

Most members of the cartel along with Russia and other non-OPEC members agreed late last year to curb production by 1.8 million barrels per day (b/d) for six months, beginning on Jan.1.

At the outset of the deal, oil prices rose, but global crude stockpiles have remained high due to substantially increased production from non-participating nations like the United States.

On Thursday, the price of oil fell below the $50/barrel mark, much lower than OPEC’s de-facto leader Saudi Arabia would like to see.

“There’s an emerging consensus among participating countries on the need to extend the production agreement reached last year,” Adeeb Al-Aama told Reuters.

He added “Based on today’s data, there’s a growing conviction that a six-month extension may be needed to rebalance the market, but the length of the extension is not firm yet.”

A final decision will be made when OPEC ministers and non-OPEC producers meet in Vienna on May 25.

OPEC’s governing board is currently holding informal consultations in Vienna where they are discussing administrative matters, and not making any policy decisions.

Reuters reports Al-Aama along with Saudi Energy Minister Khalid Al-Falih recently met with some non-OPEC pact participants and “all have expressed their commitment to the deal.”

Al-Falih is expected to visit more countries next week, he said.

Producers have reached high compliance rates that have risen every month, reaching “an impressive 98 per cent in March”, according to Al-Aama.  Current compliance rates are higher than OPEC achieved during its last cut in 2009.

According to Reuters, Al-Amma said Al-Falih spoke with Russia’s Energy Minister Alexander Novak on Thursday to discus the oil market and their upcoming Beijing meeting.

“The two ministers expressed their satisfaction with the market fundamentals evidenced by the gradual drawdown of global inventories and agreed on the need to continue working with all participants to guide oil markets towards rebalancing,” he said.

Recent reports have noted that Novak is inclined to an extend the accord.