Deeper cuts to OPEC’s oil production are not out of the question, but their implementation will depend on how things unfold with the current OPEC agreement, Russia’s Energy Minister Alexander Novak said in an interview with CNBC.
“You know, we have the capability to react to any situation that might arise on the market. And to this end we have a technical committee working on this every month,” the minister said, adding that it was his opinion that in the next couple of months, stockpiles globally will continue to decline. In two months, the committee that was set up to monitor compliance and inventory developments during the agreement will meet in Moscow to discuss how the extension is going.
Oil prices tumbled 5 percent after OPEC made its announcement yesterday, signaling the market expected more than just an extension of the current rate of cuts: it expected OPEC, combined with its non-OPEC collaborators, to deepen these to more than 1.8 million bpd.
Yet, it seems that OPEC and Russia are for now comfortable with their quotas; or perhaps they are just not willing to risk losing further market share by cutting deeper. The latter is particularly likely for bigger OPEC producers such as Saudi Arabia and Iraq. The former has already lost some market share in Asia to the latter, to Iran, and to Russia. Related: Trump Aims To Scrap Gulf Coast Oil Royalties
Iraq and Iran’s top oil men are also fine with the current arrangement, even though Iraq had as of the end of April still not sufficiently cut its output to meet its assigned quota. Energy Minister Jabar al-Luaibi, however, said at the OPEC meeting that Iraq is now compliant, producing 210,000 bpd less than in November.
Iran’s Bijan Zanganeh said before the meeting that he considered both the six-month and nine-month extension scenarios “acceptable,” without elaborating. When asked if Iran would join the cuts if it is asked to, the oil minister refrained from a direct answer.
By Irina Slav for Oilprice.com
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