The world oil market is taking longer than expected to rebalance but the glut should go by the end of March and OPEC need not take further action to curb supplies for now, Kuwait’s oil minister said.
Essam al-Marzouq also told Reuters there was no need for the Organization of the Petroleum Exporting Countries to hold an extraordinary meeting before its scheduled gathering in November because OPEC-led supply cuts were “working well”.
OPEC and 11 non-OPEC states have cut output by 1.8 million barrels per day (bpd) since January. The curbs, which were initially due to run for the first half of 2017, were extended to March 2018 in a bid to cut oversupply and lift prices.
“We are in the first two weeks of the extension period. It is too early to say now what I will do in November,” Marzouq said in an interview in the Kuwaiti capital, saying there was no need to deepen the cuts for now.
He said OPEC should “wait and see what happens, at least in the next couple of weeks until the end of July, to see the compliance data and the effect on the stocks.”
OPEC wants to bring inventories in industrialised states down from above 3 billion barrels to the five-year average of 2.7 billion. The International Energy Agency said stockpiles fell in May but remained 266 million barrels above the average.
Brent oil prices climbed above $58 a barrel in January from a 2016 low of about $27 a barrel, but persistent oversupply has driven it back below $50.
The minister said a big drawdown in global inventories had not been expected in the first half of 2017. “We have always been looking at the second half of the year,” he said, citing stronger demand in the U.S. summer driving season.
U.S. government data showed U.S. inventories in the week to July 7 fell by 7.6 million barrels, the biggest drop in 10 months and more than expected.
The minister said this showed the agreement to cut output had “started to have an impact.”
Adding to OPEC’s challenge, U.S. shale production has been rising and output from Nigeria and Libya, two OPEC states exempted from the agreement, has also climbed.
Even with higher Nigerian and Libyan production, Marzouq said OPEC output was still within the 32.5 million bpd target set under the global pact. “We are still within that range,” he said, putting average production for June for the 13 OPEC states that originally agreed on the deal at 32.4 million bpd.
A joint ministerial committee, known as the JMMC and headed by Kuwait, monitors compliance with the supply pact and meets in St Petersburg on July 24. At that gathering, Marzouq will meet counterparts from Saudi Arabia, Russia, Algeria, Venezuela and Oman.
The JMMC can make recommendations to OPEC and other oil producers to adjust the agreement, if necessary
Marzouq said it was too early to talk about recommendations to adjust the deal, or to cap production from Nigeria or Libya. “It is too early for that,” he said.
The Kuwaiti minister said oil prices had started to stabilise between $45 and $50 and said this was “what markets see now as a fair price”. But he said prices would get a boost in coming months as inventories fell.