OPEC and other oil producers are clearing a glut that has weighed on crude prices for three years and may wait until January before deciding whether to extend their output curbs beyond the first quarter of 2018, ministers said on Friday.
The Organization of the Petroleum Exporting Countries, Russia and several other producers have cut production by about 1.8 million barrels per day (bpd) since the start of 2017, helping lift oil prices by 15 per cent in the past three months.
OPEC and its allies have been considering extending the deal beyond the end of March when it is due to expire.
Russia’s energy minister said no decision was expected before January, although other ministers suggested such a decision could be taken before the end of this year.
“I think we can return to this issue not earlier than January next year,” Russia’s Alexander Novak said when asked about a timeline for any decision on extending the pact to curb supplies.
Speaking after Friday’s meeting of oil ministers in Vienna, he also said OPEC and the other producers needed to continue working closely together well into 2018.
“We need not only to keep up the pace but continue our coordinated joint actions in full, but also work out a strategy for the future, to which we will stick starting from April 2018,” he said, adding oil demand was rising at a “high pace”.
Other ministers said a decision on extending cuts could be taken in November when OPEC holds its next formal meeting.
“In November, we’re going to take decisions,” Venezuelan Oil Minister Eulogio Del Pino told reporters, adding the group was “evaluating all the options” including an extension to the pact.
Benchmark Brent crude is now trading at more than $56 a barrel, although it is still half the level it was in mid-2014.
Kuwaiti Oil Minister Essam al-Marzouq, who chaired Friday’s meeting of the Joint Ministerial Monitoring Committee, said supply cuts were helping cut global crude inventories to their five-year average, OPEC’s stated target.
“Since our last meeting in July, the oil market has markedly improved,” Marzouq said as he opened the Vienna gathering. “The market is now evidently well on its way towards rebalancing.”
He said there were a “number of positives” in the market, including stock levels in industrialised OECD states in August that were 170 million barrels above the five-year average, down from 340 million barrels in January.
He also said oil in floating storage was falling and cited a shift of benchmark Brent prices into backwardation, a market condition in which it is more attractive to sell oil immediately rather than keeping it stored. This indicates tighter supplies.
The Kuwaiti minister also said the ministerial monitoring group would continue watching production data, but would also propose a review of export data as well.
OPEC officials have said exports have a more direct impact on the international supply than production.
The supply pact sets production limits for participating OPEC and non-OPEC states but puts no restrictions on export levels, so some producers have been able to keep exports relatively high by dipping into their stored reserves.
In addition, rising crude prices have encouraged U.S. shale oil producers to ramp up output, a further reason why the drawdown on global inventories has taken longer than expected.
Ministers from Libya and Nigeria, both OPEC members but exempted from supply curbs as their oil industries recover from years of unrest, were invited to Friday’s meeting.
The Kuwaiti minister said the two nations would contribute to supply cut deal once their production stabilises.