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OPEC and its non-OPEC allies led by Russia will exit the production cuts deal very smoothly, and could extend supply restrictions in some form to ensure they would not be flooding the market, Russia’s Energy Minister Alexander Novak told Reuters in an interview published on Friday.
Novak said that he saw no direct connection between the oil production cuts and Saudi Arabia’s plan to list 5 percent of its oil giant Saudi Aramco—currently planned for the second half of 2018—in what would be the world’s biggest IPO ever.
“Everyone in the market is interested in achieving balance,” Novak told Reuters, when asked if Saudi Arabia would abruptly exit the cuts as soon as it lists Aramco at some point next year.
Under the current deal between OPEC and a Russia-led group of non-OPEC producers, the partners will be withholding 1.8 million bpd from the oil market by the end of 2018 to draw down the oil overhang and lift oil prices.
“Detailed parameters will be discussed by the time we approach balance. There could be different timeframes, depending on forecasts of supply and increasing demand in global markets,” Novak told Reuters.
“There is a consensus among the (oil) ministers that we should avoid oversupply on the market when exiting the deal,” the minister added, noting that there was an option to extend the pact after the end of 2018.
The Russian minister sees next year as “a year of balance” and expects the oil market to return to balance in Q3 or Q4 2018.
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Saudi Energy Minister Falih al-Khalid also thinks that the market will not rebalance until the second half of 2018.
“We haven’t seen any major declines in inventories that we didn’t expect. As we said last month, we still have approximately 150 million barrels of overhang, and it is going to take the second half 2018 to draw that down,” al-Falih told Reuters in an interview earlier this week.
“We expect the first few months of 2018 to be either flat or a build [in inventories] as it is typically the case with the seasonality with the oil market especially on the demand side,” the Saudi minister noted, adding that it was premature to discuss “changes in our course”.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.