OPEC is ready to commit to an extension of its oil production cuts beyond their June expiry, Saudi energy minister Khalid al-Falih said Friday, but non-OPEC partners, led by Russia, could see their quotas eased.
“I don’t think I’d be giving away a secret if I said that on the OPEC side, the rollover is almost in the bag,” Falih said at the St. Petersburg International Economic Forum, after meeting with Russian counterpart Alexander Novak. “The question is to calibrate with non-OPEC if there needs to be an adjustment.”
OPEC and 10 non-OPEC allies, led by Russia, agreed in December 2018 to cut a combined 1.2 million b/d in supplies through June to drain a glut of oil inventories and bolster prices, which had slumped majorly in the fourth quarter of 2018. Since then, fears of a global economic chill due to US-China trade tensions have overshadowed concerns of a supply risk due to US sanctions on Iran and Venezuela, with front-month ICE Brent futures dropping some 20% in the last four weeks.
“I don’t think there will be any need to deepen the cut, but whether we need to scale it back a bit will depend on what happens in Iran, Venezuela and other countries,” Falih said. “I’m hoping that it will be an easy decision and we will roll over [the cuts], but if not we will be flexible.” Saudi Arabia itself has cut its own production to 9.65 million b/d in May, the minister said, far below its quota of 10.31 million b/d, to demonstrate its commitment to rebalancing the market.