Abu Dhabi: Saudi Arabia said on Monday the deal reached in December between Organisation of Petroleum Exporting Countries (Opec) and non-Opec countries to cut oil production levels is unlikely to be extended.
Khalid Al Falih, Saudi Arabia’s Minister of Energy, Industry and Mineral Resources, said due to the level of compliance to the agreement is helping rebalance the market. The agreement was for a period of six months.
“Based on my judgement today, it is unlikely that we will need to continue the agreement. The demand will pick up in summer and we want to make sure that markets are continued to be supplied well,” Al Falih, who is also chairman of Saudi Aramco, told reporters on the sidelines of World Future Energy Summit that started in Abu Dhabi on Monday.
He, however, said they would reassess the situation and extend the deal if necessary.
“There are many variables that could come into play between now and June. We will assess the situation and extend it if necessary if all players agree,” he said without providing further details.
“We don’t want to create a shortage or squeeze. Rebalancing of oil markets which started slowly in 2016 will have its full impact by the first half of this year.”
Oil prices moved up following the deal in Vienna on December 10 with global benchmark Brent trading above $55 per barrel recently. Oil was down 0.27 per cent to trade at $55.30 per barrel at around 5pm UAE time on Monday.
The 13-member Opec group and 11 countries from outside the group have agreed to reduce output by about 1.8 million barrels per day starting from January 1.
Al Falih said on Thursday at Atlantic Council Global Energy Forum that they will consider renewing the historic deal reached between Opec and non-Opec members last month to rebalance oil markets.
When asked whether Saudi Arabia would keep production below 10 million barrels per day for many more months, the Saudi oil minister said they would strictly commit to the production cuts.
“Output would either be at the kingdom’s output target according to the Opec deal or slightly below as is the case now.”
Meanwhile Oman’s Oil Minister Mohammad Bin Hamad Al Rumhy said they have cut production by 45,000 barrels per day in line with the agreement and are happy with the current price.
“We cut production by 45,000 barrels day since December. We not only cut production at well head but also at the terminal. If there is a good compliance, we might exit the year at $60 per barrel.”
Oman is among the 11 non-Opec members that signed the oil production cut agreement last month along with 13 Opec members.
Iraq also said last week they are complying with the deal. Iraq’s Oil Minister Jabbar Al Luaibi said Iraq has cut oil production by 170,000 barrels per day and is expected to cut further in the coming days.
“We already cut by 170,000 barrels per day and we are going to knock down another 40,000 barrels per day by the end of the month to take the total reduction by 210,000 barrels per day,” said Al Luaibi last week in Abu Dhabi.
