Oil climbs on Saudi Arabia support for supply curb extension
Oil found support on Monday after global crude producers reaffirmed their commitment to supply curbs for all of 2018, with Opec kingpin Saudi Arabia saying “cooperation” should continue beyond this year. Brent crude, the international oil benchmark, rose 16 cents to $68.77 a barrel.
West Texas Intermediate, the US marker, increased 19 cents to $63.50 a barrel. Opec and allies outside of the cartel such as Russia have cut back output since 2017 to reduce excess inventories and bolster prices, with producers agreeing late last year to extend the deal for 2018. Saudi Arabia, the world’s top oil exporter, said that producers should continue joint efforts into next year, underlining the need to prevent another price crash which battered the economies of oil-rich states
“There is a readiness to continue cooperation beyond 2018,” said Saudi Arabia’s energy minister Khalid Al Falih on Sunday. “The mechanism hasn’t been determined yet, but there is a consensus to continue.” The kingdom has sought to prop up prices as it enacts widespread social and economic reforms and prepares to sell shares in its state oil company Saudi Aramco.
Brent crude rose above $70 a barrel in the past few weeks. His comments came at a news conference after a meeting of ministers, including representatives from Russia and Kuwait, that are monitoring the compliance of individual countries and implementation of the deal.
The remarks follow comments by ministers in recent months that countries do not wish to ramp production up drastically when the deal expires, to avoid a shock to the market. Before the meeting of the monitoring committee, Mr Falih said extending the cooperation framework past 2018 does not necessarily mean keeping to individual country production targets. Joint efforts are “here to stay.
And we are going to work together,” he added. Ministers and Opec officials have stressed the need to institutionalise a framework between the cartel and non-Opec countries, although it is unclear what this formally looks like. The impact of the Opec-led cuts, however, has been blunted by “explosive” expansion in US shale oil production, the International Energy Agency said on Friday.
Still, the oil market is moving toward balance as demand growth remains strong and outages such as those in Venezuela help to rebalance the market. Mr Falih, however, said an intention to bring global inventories to their targetted five year average needed to be reassessed. “I think we have to identify more clearly what is the normal level,” he said. “I think one of the things we need to define in the next few months...is what is the real target more precisely.”