Oil producers are working to build consensus on extending their deal to reduce supplies, OPEC’s secretary general said on Thursday, with the potential for continuation throughout 2018 forming a basis for talks.
The Organization of the Petroleum Exporting Countries, plus Russia and nine other producers, are cutting oil output by about 1.8 million barrels per day (bpd) until March 2018 in an attempt to eradicate a supply glut that has weighed on prices.
The deal has supported prices, which are trading within sight of a two-year high, but an overhang of stored oil has yet to be fully eradicated and producers are considering extending the deal at their next meeting on Nov. 30.
OPEC Secretary General Mohammad Barkindo, in a briefing with reporters on Thursday, said that Russian President Vladimir Putin’s suggestion this month that the deal could be extended to the end of 2018 were being taken “seriously”.
Saudi Energy Minister Khalid al-Falih, the OPEC president, and Russian Energy Minister Alexander Novak “are taking cue from the open statement of President Putin and engaging the rest of the participating countries ... to build consensus before November 30”, Barkindo said.
Reuters reported on Wednesday, citing OPEC sources, that producers are leaning towards extending the deal for a further nine months, though the decision could be postponed until early next year depending on the market.
Barkindo said it wasn’t yet clear if the decision would be made on November 30 and, asked whether another meeting could be held in early 2018, said that Falih and Novak would consult and decide.
“It’s difficult to say at the moment what will be decided in November,” Barkindo said.
“It will depend on a number of factors, chief among which is how far are we from achieving our objective of a convergence of supply and demand.”
Falih and Novak are also talking to producers not currently participating in the supply cut, Barkindo added.
Balanced market in sight
Earlier in the day Barkindo said the supply pact was helping to speed the balancing of the crude market.
“There is no doubt that this market is rebalancing at an accelerating pace,” he said in a speech at the Oil & Money conference in London.
“Stability is steadily returning and there is far more light at the end of the dark tunnel we have been travelling down for the past three years.”
Oil prices, trading above $57 on Thursday, are half their level of mid-2014, prompting energy companies to cut back on exploration and producers to curb production.
The supply pact is aimed at reducing oil stocks in OECD industrialized countries to their five-year average.
Stock levels in September were about 160 million barrels above that average, Barkindo said, down from January’s 340 million barrels above the five-year average.