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By Grant Smith, Salma El Wardany and Dina Khrennikova sure 03/17/2019
LONDON, CAIRO and MOSCOW (Bloomberg) – OPEC and its allies still have a long way to go in balancing global oil markets and are ready to take the necessary steps in the second half of the year, the Saudi energy minister said. Khalid Al-Falih.
The coalition of 24 countries known as OPEC + must "stay the course" until June, its work being "far from complete" in terms of restoring the fundamentals of the oil market, Al-Falih said Sunday Sunday at a press conference in Baku, Azerbaijan. US inventories remain well above normal levels and there is a risk of overproduction in the short term, he said.
However, the extension of the Russian-Iraq production reduction agreement, which is one of the two largest producers of the pact, has not been fully supported. At the same meeting, Russian Energy Minister Alexander Novak said the production uncertainties in Venezuela and Iran are preventing the coalition from determining its next step until May or June.
The ministers announced on Monday in Baku the meeting of a committee composed of OPEC + members responsible for monitoring the results. The Organization of Petroleum Exporting Countries and its allies are entering their third year of supply reduction in order to defend crude prices. Although they contributed to a 25% recovery in Brent this year, current prices, at around $ 67 per barrel, remain well below the levels needed by most producers to cover government expenditures.
Job still remains
"My badessment is that the work remains before us," said Al-Falih. "We continue to see stocks build up." At the same time, many investors are reluctant to invest in oil exploration and production because of uncertainty, and OPEC + does not want a situation where crude prices are too high, he said.
"We remain ready to continue to monitor supply and demand and do what we need to do in the second half of 2019 to maintain a balanced market," said Al-Falih.
US President Donald Trump has lobbied OPEC to "soften" its position on supply reduction, as tensions on production by two members – Iran and Venezuela – threaten to cause a shortage.
Al-Falih said that the crises had not changed his view on the need to persevere in the limitation of production, the losses in these two countries not being serious enough to prevent a further accumulation of stocks. oil. If the decline in the Iranian and Venezuelan supply intensifies, OPEC is ready to react as in the past, he said.
Better compliance
Producers are complying with the production cuts they've agreed to make starting in January, and their compliance will improve and easily exceed 100% in March, said Al-Falih. Saudi Arabia will pump about 9.8 million barrels in March and April and export less than 7 million barrels in two months, he said. The kingdom has a production target of 10.3 million barrels.
"We agreed today that we should continue to monitor the situation and in May or June to discuss decisions for the second half of the year," Novak said at the conference. Russia cut production by 140,000 to 150,000 bpd on average in March compared to October, the reference month for Russian cuts, Interfax reported.
Iraq is doing its best to meet the announced reduction and will pump less in March than in January or February, said Iraqi Minister Ghadhban. While welcoming the price increases resulting from the current agreement, he hoped that producers would continue to apply the promised cuts.
"We should go on until June, and then decide, but we are constantly observing and badyzing the market," Ghadhban said.
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