Oil meeting at OPEC as strategy bears fruit

Shifting Supply Shrinks Crude Differentials

Source EIA

As an OPEC committee meeting wrapped up, Russian Minister of Energy Alexander Novak said the cartel and allied producers can wait until at least January next year to consider prolonging the output limits.

Nigeria, one of several countries that is exempt from the production cut deal, has also signaled a willingness to cap its output once production stabilizes at 1.8 million barrels a day.

Oil Minister Emmanuel Ibe Kachikwu made the announcement in Vienna, where the Organization of Petroleum Exporting Countries' headquarters is located.

OPEC and its allies have agreed to reduce production by about 1.8 million barrels per day up to March 2018 in an effort to reduce global supply surplus.

Acknowledging the gains so far made, Al-Falih cautioned against complacency, and emphasized the need for under-performing participating countries to raise their levels of compliance to 100 per cent in order to further boost cooperation towards the rebalancing of the market.

USA benchmark, November West Texas Intermediate crude US:CLV7 lost 5 cents, or 0.1%, to $50.51 a barrel on the New York Mercantile Exchange.

"We didn't listen to any of them and I said we would never accept that our production fall below the pre-sanction level", said Zangeneh who also warned of a rapid fall in Iran's oil production due to delayed investment.

"We evidence lower volatility on the market, and the price of Brent crude oil 30% higher in the first half of 2017 versus the first half of 2016", he said.

Other ministers said a decision on extending cuts could be taken in November when Opec holds its next formal meeting.

Earlier in the week, Kuwait's oil minister said the oil market was already on the way to re-balancing.

The agreement signed by 24 producing countries, was enacted last January 1 with the objective of withdrawing from the market nearly 1.8 million barrels per day of oil.

Still, CHS Hedging's Headrick said "the USA oil producer has proven to be very resilient in the face of lower prices".

The producers are heartened by an apparent market recovery which has seen the global benchmark Brent rise to a six-month high to more than $56.

In addition, rising crude prices have encouraged United States shale oil producers to ramp up output, a further reason why the drawdown on global inventories has taken longer than expected.

Crude oil exports have risen almost 60% year over year and product exports are up 17%.

At this its 5th meeting, the JMMC welcomed the participation of Iraq, Libya and Nigeria, and the reaffirmation of their commitment to ensure the success of the Declaration of Cooperation. The meeting was likely to be brief, two OPEC delegates said.

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