Saudi Arabia said the Organization of the Petroleum Exporting Countries (Opec) plus Russia and other producers are likely to extend oil production cuts at around current levels as the kingdom did not want a fight for market share with the US or a repeat of the price collapse five years ago.
The Opec plus Russia and other producers, an alliance known as Opec+, have a deal to cut output by 1.2 million barrels per day (bpd) from January 1. The pact ends this month and the group meets in coming weeks to decide their next move.
The kingdom's Energy Minister Khalid Al Falih also said Opec was close to agreeing to extend a pact on cutting oil supplies beyond June, although more talks were still needed with non-Opec countries that were part of the production deal.
The minister said he was sure that Opec+ will extend production cuts into the second half of the year after holding talks with Russia, it stated.
Ministers from the countries voiced similar concerns about the impact of a slowing global economy on oil prices and talked up the benefits of cooperation. The unified front presented on Friday appeared to resolve signs of division visible in the previous days.
Still, the two leaders of the coalition between the Opec and several non-members stopped short of any specific commitments on production volumes after the current output deal expires at the end of this month. They were also unable to fix a date for a meeting to discuss the matter with fellow ministers.
“I don’t think the question is at all whether we will extend or not,” Al Falih said.
“A rollover is almost in the bag for Opec. The question is to calibrate with non-Opec if there needs to be an adjustment from the first half,” he stated.
Supply has also been limited by US sanctions on oil exports from Venezuela and Iran. On Thursday, Washington tightened pressure on Venezuela’s state-owned oil company by making clear that exports of diluents by international shippers could be subject to sanctions.
“I don’t think there will be a need to deepen the cut, but whether we need to scale it back a little bit will depend on what happens in Iran, Venezuela, other countries,” he added.
US oil futures slumped back into a bear market this week, while Brent crude dipped below $60 a barrel in London for the first time since January, said a report.
“The biggest drivers are now sanctions, tariff wars” and they cannot be predicted, Russian Energy Minister Alexander Novak said. “The situation in the market is far from being a positive one” and demand growth may slow to below 1 million barrels a day, so the Opec+ deal “is a very great instrument for dealing with this uncertainty.”
While the Saudis have clearly wanted for some time to extend the group’s production curbs beyond their expiry at the end of this month, Russia had been at best non-committal. President Vladimir Putin showed little concern this week about the latest market moves and said his country was better placed to withstand lower prices than its Gulf ally.
“We have certain differences in opinion regarding the fair price” compared with Saudi Arabia, Putin told reporters on Thursday. “$60-65 a barrel suits us just fine” because Russia’s budget is based on $40 crude, he said.
