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The oil ministers of Iran and Qatar have suggested that OPEC’s production cut agreement may have to be extended beyond the June deadline, despite an almost 100-percent compliance rate.
The comments come a day after the American Petroleum Institute reported the second-largest crude oil inventory increase in history, at 14.227 million barrels, which added fuel to worries that production cut efforts are not enough to rebalance the market.
Iran’s Oil Minister, Bijan Zanganeh, told Iranian media after a meeting with his Venezuelan counterpart that the option of extending the cut needs further study, but, he said, “in principle” the group must do it. Zanganeh also said that most OPEC producers would be happy with oil at US$60 – a level that has proved difficult to reach.
Qatar’s Oil Minister Mohammed Al Sada, for his part, spoke at a news conference in Doha, saying that the oil market may rebalance in the third quarter, adding that “it’s too early to make a judgment.”
At the same time, however, Qatar’s Finance Minister said that the country is comfortable with the current level of oil prices, with expectations that it will be able to plug its budget hole this year, at oil price levels of US$45, as stipulated in the budget.
Related: Huge Crude Inventory Build Sparks Wave Of Panic Buying
The latest update from OPEC on how the production cut was progressing pegged daily production for January at 32.89 million barrels, versus a target of 32.5 million barrels. This represented a compliance rate of 91 percent and suggested that nearly everyone is on board with the market rebalancing effort.
Iraq is still producing 130,000 bpd more than agreed, but as a whole, the cartel is exceeding expectations of compliance. This, however, seems to be insufficiently lifting benchmark prices. After API’s report yesterday, WTI slipped below US$52 and Brent dropped below US$55.
Both WTI and Brent benchmarks climbed following Wednesday’s EIA inventory report that showed gasoline inventories decreased, contrary to yesterday’s forecasted build by the API.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.