In a matter of a week, Kuwait has simultaneously said it was seeking to boost production, called for an output freeze to rebalance the market glut, and—most recently—praised OPEC’s strategy for pushing out US shale as successful.
Now that oil is near US$50 per barrel, the Saudi-led OPEC strategy to hang onto market share doesn’t seem so bad.
As told by Kuwait’s acting oil minister, Anas Al-Saleh, in a Wednesday interview with media in Kuwait, the Gulf country will stick by the Saudis as OPEC defends its market share by pumping more to win customers, rather than targeting price.
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It’s a strategy, he said in comments carried by Bloomberg, that is working. Crude prices are rising along with demand, and output from non-OPEC countries is declining. Some 3 million barrels per day of supply has left the market due to either the disruption of conflicts (Nigeria, Libya) or natural disasters (Canadian wildfires) or price (US shale).
“Now we see better prices in the market, demand has been increasing […],” al-Saleh was quoted as saying.
So the “theory has been working well,” and Kuwait will be “sticking to the market share strategy.”
It’s not the same line Kuwait was taking last week, before all the supply disruptions started to reverberate through the market.
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But let’s take it in order. First up last week, a senior Kuwait Petroleum Corp official has confirmed to media the company’s plans to increase production by 44 percent to almost 4 million barrels a day in 2020. That was when Kuwaiti crude was trading at around $40 per barrel.
Then just days later, Kuwait was calling for an output freeze, ahead of OPEC’s planned 2 June powwow. This came as Moody’s downgraded the credit ratings for Kuwait’s wealthier Gulf neighbors, Saudi Arabia among them.
Kuwait warned that the only solution in sight for the oil-producing countries is output freeze. "There is no option but to freeze output," the country’s Deputy Foreign Minister Khaled Suleiman Al-Jarallah told Japanese media during a visit to Tokyo.
By James Burgess for Oilprice.com
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