To keep the air of mystery, or whatever remains of it after the November 30 Vienna Club meeting, Kuwait’s Oil Minister Issam al Marzouq yesterday said the cuts may end before the end of 2018.
“We still have a full year left in the agreement, but there is a possibility that we exit the cuts agreement before 2019 if the market is re-balanced by June,” Al Marzouq said, adding that Russia was pressuring its partners in the agreement to end it as soon as it is possible. The minister was speaking to Bloomberg on the sidelines of an event of the Organization of Arab Petroleum Exporting Countries.
Separately, at the same event, Al Marzouq said he expected the market to rebalance no sooner than the last quarter of 2018, in keeping with the extension that OPEC and its partners agreed to in Vienna last month. He added that prices should remain at current levels, which seem to be just high enough to stimulate increased drilling in the United States: the first Baker Hughes rig count report for December revealed an addition of two rigs, to a total 751, pressuring international oil prices immediately, albeit moderately.
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WTI continues to trade above US$57 a barrel and Brent is still above US$63, but as one analyst told Reuters, if U.S. production continues to increase, it would undermine the cuts that OPEC, Russia, and ten other producers agreed to. In other words, they might decide to drop the whole thing before December 2017 if it fails to restrain U.S. production.
However, optimism seems to be prevailing at the moment, and as Russia’s Alexander Novak told the media in Vienna, OPEC and its partners had factored in an increase in U.S. shale production—the spearhead of growing overall production in the world’s largest oil consumer. How much of an increased they factored in remains unclear.
By Irina Slav for Oilprice.com
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