OPEC’s job of rebalancing the oil market has met with rising global inventories that have defied U.S. sanctions on Iran and Venezuela with signs output cuts may spill into the second half of 2019.
This has been compounded by slowing economic growth in Asia’s biggest economies such as China and Japan. Japan’s exports fell for a third straight month in February in a sign of growing strain from slowing global demand.
A ministerial panel of the Organisation of Petroleum Exporting Countries and its allies recommended on Monday that they cancel the extraordinary meeting scheduled for April 17-18, which means the next regular talks would be held from June 25 to June 26.
“The consensus we heard is that April will be premature to make any production decision for the second half,” Khalid al-Falih, the Saudi energy minister, said on Monday.
Brent crude rose to $67.23, addition $0.07, an increase of 0.01 percent as at 1409 GMT. West Texas Intermediate nudged ups to $58.56, adding $0.04, a growth of 0.07 percent.
Russia, which is cutting oil output in tandem with OPEC, also said production cuts would stay in place at least until June, when Washington’s next steps on reducing Iran’s and Venezuela’s oil exports become clearer, Reuters reported on Monday.
“As far as the meeting is concerned we, of course, discussed the situation with the execution of the agreement (and) we stressed once again that Russia is discharging its obligations in accordance with the agreement to smoothly achieve the target output,” Alexander Novak, Russia’s energy minister said Sunday in Baku, Azerbaijan, according to a translation before the Joint Ministerial Monitoring Committee (JMMC) meeting.
OPEC and its allies agreed in December to cut output by 1.2 million barrels per day, 1.2 per cent of global demand, during the first half of this year in an effort to boost prices.
“Compliance with the deal among OPEC members is about 94 percent, so that is going quite well. The non-OPEC producers are coming in a little lower but the compliance rate is increasing also” said Neil Atkinson, head of oil industry and markets division at the Paris-based International Energy Agency.
Inventory levels and oil investments are the two main factors guiding OPEC’s action, Falih said, adding that oil industry estimates show that 11 trillion dollars of investments will be needed over the coming two decades to meet demand growth.
Key for the supply and demand balance will be the United States, where crude production has soared by around 2 million bpd over the past year, thanks largely to an onshore boom in shale formation drilling.
The United States has been increasing its own oil exports in recent months while imposing sanctions on OPEC members Venezuela and Iran in an effort to reduce those two countries’ shipments to global markets.
Washington’s policies have introduced a new level of complication for the Organization of the Petroleum Exporting Countries as it struggles to predict global supply and demand.
“Our base case is that global oil demand will increase by 1.3 million barrels per day (bpd) in 2019. A synchronised global slowdown in growth could push global demand growth to below 1 million bpd,” Bernstein Energy said on Monday
U.S. President Donald Trump has been a vocal critic of OPEC, blaming it for high oil prices. Many OPEC members have said Trump’s sanctions policies have elevated the market.
“We are not under pressure except by the market,” Falih told reporters before the JMMC meeting in the Azeri capital, Baku, when asked whether he was under U.S. pressure to raise output.
Oil prices dipped on Monday amid concerns that an economic downturn may dent fuel consumption, but crude markets remain broadly supported by supply cuts led by producer group OPEC and U.S. sanctions against Iran and Venezuela.
STEPHEN ONYEKWELU
