Opec to stay output course despite pressure

Opec and its non-Opec partners are committed to reducing production in line with their latest agreement despite criticism from the US.

"We need to drive inventories lower than current levels," an Opec source told Argus, adding that a key goal of the producer group is to achieve a balanced market. "Decisions are based on market fundamentals, not political consideration," the Opec delegate said.

Earlier today, US president Donald Trump resumed criticism of Opec over rising oil prices. "Oil prices getting too high. Opec, please relax and take it easy. World cannot take a price hike — fragile!" Trump said via Twitter.

Trump in the past year has periodically used Twitter to chide Opec over price hikes, to urge Saudi Arabia to increase production and to thank Riyadh for responding to a request to increase output.

The US Energy Information Administration (EIA) attributed much of price volatility in global oil markets over the last year to Trump's decision to reimpose restrictions on Iran's crude exports beginning in November 2018.

The administration's actions caught the market by surprise twice. The US initially said it would drive Iran's exports down to zero, only to change course and grant waivers enabling eight countries to continue buying Iranian crude for a six-month period ending in early May.

The US explained the granting of waivers by high oil prices in the third quarter of 2018. US officials cite recent EIA assessments to justify their view that US sanctions can achieve a total cutoff in exports from Iran after 3 May without destabilizing the market. Having sufficient, adequately priced oil supply is a legal standard the administration has to meet for Iran sanctions enforcement.

US officials expressed appreciation to Saudi Arabia for lifting its production to record levels as Washington reimposed sanctions against Iran last year.

But Riyadh has since changed course. Saudi Arabia plans to produce 9.8mn b/d in March, an 840,000 b/d cut from its stated December level. And the US at the same time is enforcing sanctions against Venezuela that will curb exports from that country in coming months.

Saudi Arabia's oil minister Khalid al-Falih said last week he hopes the market will be balanced by April but left the way open for continued supply restraint by Opec and its non-Opec partners after the expiry of the current January-June 1.2mn b/d cut deal.

Referring to concerns that US sanctions on Iran and Venezuela will tighten global crude supplies, al-Falih said: "We hope there will be no gap."