OPEC Positive About Market Rebalancing, Supporting Prices

An OPEC-led supply cut deal is helping rebalance the global oil market, OPEC's secretary-general said on Monday, noting that higher demand in the rest of this year should lead to further reductions in oil inventories.

The Organization of Petroleum Exporting Countries and other producers, including Russia, are reducing crude output by about 1.8 million barrels per day until next March in a bid to reduce inventories and support prices, Reuters reported.

“It is clear the rebalancing process is underway, supported by the high conformity levels of OPEC member countries and participating non-OPEC countries,” Mohammad Barkindo added.

Barkindo was addressing an energy seminar in Oxford.

"Oil inventories are coming down onshore and oil held in floating storage has been declining since June," he said.

As well as the supply cut, a rise in demand of close to 2 million barrels a day in the second half of the year relative to the first will help get rid of excess oil in storage.

“This boost in demand will contribute to further reductions in commercial inventories,” Barkindo said.

Ministers are now discussing extending the supply cut for at least three more months beyond March, before OPEC meets again in November.

The supply cut helped boost crude prices above $58 a barrel in January, but prices have since slipped back to around $54, as the effort to clear a supply glut has taken longer than expected.

Oil ministers from four major oil producing countries—Saudi Arabia, the UAE and Venezuela of OPEC, and Kazakhstan—said after meetings in Astana that market fundamentals are pointing to a more bullish 2018 and agreed output cuts could be extended past their March expiry if conditions warrant.

Saudi Energy Minister Khalid al-Falih met with Venezuela's new Oil Minister Eulogio Del Pino, and separately with Kazakhstan's Energy Minister Kanat Bozumbayev, in the Kazakh capital Astana on Saturday, according to statements from the Saudi Energy Ministry.

Falih then met UAE counterpart Suhail al-Mazrouei, the Saudi ministry said in a statement on Monday. All options were open in the voluntary rebalancing efforts, the producers were quoted as saying.