Opec, non-Opec committee to study output cut extension
Kuwait City, 26 March (Argus) — The committee charged with monitoring producer compliance with the Opec and non-Opec agreements to cut production today set the wheels in motion for a possible extension of both beyond the initial six-month period.
Following its second meeting in Kuwait, the joint ministerial monitoring committee (JMMC) said in a communique that it has asked the Opec secretariat and a joint technical committee to "review" oil market conditions to determine whether the agreements should be extended by a further six months.
The secretariat and technical committee will then "revert to the JMMC" with their recommendations before the JMMC's next meeting, which is scheduled for late next month.
Opec and 11 non-Opec producers agreed late last year to commit to scaling back their collective output by close to 1.8mn b/d in the first six-months of this year to help speed up the rebalancing of global oil supply and demand, and in turn, support oil prices.
Talk of an extension grew in the run-up to the meeting after a larger than expected surge in US crude oil inventories contributed to a 10pc drop in crude prices in the second week of March.
The Iranian, Kuwaiti, Venezuelan, Algerian and Omani oil ministers voiced support for an extension to the two agreements prior to the 26 March meeting, and all attended the gathering in Kuwait.
But speaking after the meeting, UAE energy minister Suhail Mohamed Faraj al-Mazrouei stressed that at this stage, an extension was only one of the options available to the 24 Opec and non-Opec countries party to the two output cut deals.
The Opec secretariat and technical committee "will come up with many options," when they review market conditions over the coming month, al-Mazrouei said. "I think it is premature [to say whether we need to extend]. We will study all the options. We are not studying one option," he said.
Kuwaiti oil minister Issam al-Marzouq, who also chairs the JMMC, said that a decision to extend the agreements would only be taken if all participating countries were on board. "Any country has the freedom to say whether they support or they do not," he said. "Unless we have conformity from everybody, we cannot go ahead with the extension of the deal."
In its final communique, the JMMC "expressed its satisfaction with the progress made towards full conformity with the voluntary production adjustments, and encouraged all participating countries to press on towards 100pc conformity."
But while al-Marzouq pegged overall Opec and non-Opec conformity levels at 94pc for February, he acknowledged that the high overall level was due to deep cuts made by countries like Saudi Arabia and Angola, which have both cut by more than pledged under the agreement.
"I would like to candidly say that, in general, more has to be done. We need to see conformity across the board," al-Marzouq said. "If we reach our common objective, we could see balance returning to the market by the third quarter of 2017. If not, this date may be pushed further out."