Saudi Arabia, Kuwait Signal Crude Output Cut Extension

Saudi Arabia, Kuwait Signal Crude Output Cut ExtensionSaudi Arabia, Kuwait Signal Crude Output Cut Extension

Persian Gulf oil exporters Saudi Arabia and Kuwait gave a clear signal on Thursday that OPEC plans to extend into the second half of the year a deal with non-member producers to curb supplies of crude.

Consensus is growing among oil producers that a supply restraint pact that started in January should be prolonged after its initial six-month term, Saudi Energy Minister Khalid al-Falih said, Reuters reported.

"There is consensus building but it's not done yet," Falih told reporters at a conference in the United Arab Emirates.

Kuwait's Oil Minister Essam al-Marzouq said he expected the agreement to be extended. "Russia is on board preliminarily ... Compliance from Russia is very good," Marzouq said.

OPEC Secretary-General Mohammed Barkindo, noting that Marzouq chairs a committee that measures compliance with the cuts, said, "It is significant that the Kuwaiti minister has come out in public and said this."

OPEC is keen that non-member producers play their promised part in supporting the group's efforts to lift prices, which have recovered to $53 a barrel from lows last year below $30.

The Organization of Petroleum Exporting Countries and non-OPEC meet on May 25 to discuss extending the curbs that total 1.8 million barrels daily, two-thirds of that from OPEC.

OPEC sources said an internal assessment was that if they failed to extend the agreement, oil could slide back to $30-$40 a barrel. Falih said his main concern was to reduce global oil inventories, calling that "the main indicator for the success of the initiative".

The International Energy Agency said last week that inventories in industrialized countries were still 10% above the five-year average, a key gauge for OPEC. Marzouq said there was a "noticeable increase in compliance from non-OPEC". Joint compliance among OPEC and non-OPEC in March was above 90%, he said. He added that an African nation, which he did not identify, had expressed interest in joining the 24-country effort.

Iran does not look likely to become an obstacle. The current deal granted Tehran permission to lift output, hit by international sanctions that ended just over a year ago.

"Iran is not an issue. We know they can't raise their production much more," an OPEC source said.


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