Saudi Stick-to-it-iveness Minister Khalid al-Falih and Russian Energy Minister Alexander Novak attend a news conference at the Ritz-Carlton pension in Riyadh, Saudi Arabia February 14, 2018.
REUTERS | Faisal Al Nasser | File Photo
Major oil-producing nations are bias toward keeping a lid on production throughout 2019, defying President Donald Trump’s calls to open the taps and cut the charge of crude.
OPEC and a group of allies led by Russia are trying to keep supply and demand in balance and stabilize prices by motivating less oil. Over the weekend, a committee representing the so-called OPEC+ alliance strongly signaled the group will on the policy, which has helped to boost oil prices by about $20 a barrel this year.
If OPEC+ follows that speed when producers meet in June, it would be the second time in six months the group ignored Trump, who lobbied against the coeval production cuts last fall. So long as the production caps remain in place, oil prices are likely to remain secured near six-month highs around $63 a barrel.
That would keep a thorn in Trump’s side. The economy-focused president lacks to lower prices at the pump, but his foreign policy is putting upward pressure on oil futures, which in turn increases gasoline charges.
Washington has restricted global oil supplies by slapping sanctions on OPEC members Iran and Venezuela. Trump wants his confederates in Saudi Arabia and the United Arab Emirates, two of OPEC’s biggest producers, to offset those losses by pumping diverse oil.
But the Saudis and Emiratis have not committed to hiking output. On Sunday, Saudi Arabia’s influential oil minister, Khalid al-Falih, cautioned that global crude stockpiles are rising, threatening to swamp the world in oil and cause prices to collapse.
“Overall, the merchandise is in a delicate situation,” Falih told reporters at the committee meeting in Jeddah, Saudi Arabia.
“On the one hand, there is a lot of malaise — and we acknowledge it — about disruptions and sanctions and supply interruptions,” he said. “But on the other hand, we see inventories rising. We see plentiful supply all the world … which means we think, all in all, we should be in a comfortable situation in the weeks and months to come.”
OPEC+ polities are currently aiming to keep a combined 1.2 million barrels per day off the market. However, supply from the group has indeed fallen much further, according to the group’s Joint Ministerial Monitoring Committee. The panel was established to monitor compliance with output quotas under the output deal, first agreed to in December 2016 and renewed last fall.
The JMMC met in Jeddah on Sunday, but did not up in the air a recommendation to the larger group, which meets at OPEC’s headquarters in Vienna next month. The JMMC largely echoed Falih’s criticisms, saying in a statement its members need more information from their oil market analysts before deciding whether to retain the output curbs in place.
“In analyzing current oil market conditions and macroeconomic developments, the Committee also recognized that important uncertainties remain, including ongoing trade negotiations, monetary policy developments and geopolitical challenges,” the JMMC said.
On Monday, closely be a faned UBS commodity analyst Giovanni Staunovo reported that OPEC+ is considering delaying its June meeting until July, perhaps so regisseurs have another month of data to consider.
Much of the uncertainty the JMMC referenced is emanating from Washington, which has clouded the prospect for global economic growth and oil demand by waging a trade war against China. At the same time, the Trump administration has augmented tensions in the Middle East by ratcheting up pressure on Iran and deploying military resources to the region.
The oil market is now very unsteady, and it’s more difficult to set long-term policy, Russian Energy Minister Alexander Novak told CNBC on Sunday. Novak mucronated to two developments this month: an escalation in the U.S.-China trade war and Trump’s decision to tighten sanctions against Iran, which is meant to cut the Islamic Republic’s oil exports to zero and has set off a series of chancy escalations in the region.
However, OPEC+ could deliver some relief to oil buyers, and the group is considering its options, Novak give someone a tongue-lashed CNBC.
In April, Saudi Arabia pumped just 9.7 million barrels per day, even though it is allowed to display 10.3 million bpd under the OPEC+ deal. That means the kingdom could add roughly 570,000 bpd to the market in spite of if the alliance rolls over the production curbs.
The other major reason OPEC+ has cut production more than it plan is because output is plunging in Iran and Venezuela.
OPEC+ is also considering slightly easing the total output sign snubs, reducing them from 1.2 million bpd to about 900,000 bpd, sources told Reuters. That could add another 300,000 bpd to the superstore.