Saudi Arabia urges global oil producers to continue cooperation in 2019

Saudi Arabia urges global oil producers to continue cooperation in 2019

Saudi Arabia urges global oil producers to continue cooperation in 2019

"We need to be talking about a longer framework for our cooperation", Saudi Arabia's Energy Minister Khaled al-Faleh told reporters before the meeting.

"This doesn't necessarily mean sticking barrel by barrel to the same limits or cuts, or production targets country by country that we signed up to in 2016, but assuring stakeholders, investors, consumers and the global community that this is something that is here to stay".

"We are entering a low demand period seasonally, and we have to let that pass and see how inventories look in the second half before we consider any alteration" to current policy, he said.

The committee comprises Saudi Arabia, Kuwait, Venezuela and Algeria, plus non-OPEC producers Russian Federation and Oman.

Both ministers however, did not elaborate as to what form the new deal may take or if the proposed idea has the backing of other major global producers.

The accord was first struck at the end of 2016 with the aim of reining in a global supply glut that has weighed on prices for over three years.

"The [production] cut in 2019 should be seen positively in the market".

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He pointed out that "If Brent is still trading around $60 a barrel and oil inventories are close enough to OPEC's five-year average", the deal may be phased out via nations gradually weakening their cutback compliance.

Oil giants met in Oman's capital Sunday and agreed to preserve production cuts in 2018, to help balance a market still fragile to global economic trends and overheating.

Energy futures came under pressure from slight profit-taking on Friday after the International Energy Agency forecast a big supply-side response to crude oil futures hovering near $70 a barrel. In its monthly report the International Energy Agency (IEA) warned that rapidly increasing production in the United States could threaten the market's balancing.

Despite the cuts, the rig count in 2017 and early this year remains much higher than in 2016, resulting in a 16-per-cent rise in USA crude oil production since mid-2016, to 9.75 million barrels per day (bpd).

"The stage was set for a strong expansion past year when non-OPEC supply, led by the US.pushed up world production", offsetting output cuts by the Organization of the Petroleum Exporting Countries and other producers, the IEA said. Most analysts are betting that oil prices will remain well-supported and so the market is not expecting steep or early declines.

However, according to a recent Reuters survey, some analysts question the sustainability of the USA shale oil production growth, particularly if prices were to soften once more, with some believing that shale oil production may have already peaked.

Indeed, although excess oil inventories had been reduced by 220m barrels from the 340m barrels at which they stood at the start of 2017, Al-Falih said it was "uncertain that the pace of inventory drawdown would continue in coming months".

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