MINISTERS HINT COOPERATION BETWEEN OPEC, NON-OPEC NATIONS TO EXTEND BEYOND 2018

The meeting of the Joint Ministerial Monitoring Committee (JMMC) ended on a positive note at Grand Hyatt Muscat on Sunday with record conformity levels shown by both OPEC and non-OPEC members for the production cuts agreement.

The JMMC meeting also raised prospects for extension of cooperation between the OPEC and non-OPEC members beyond 2018. The JMMC meeting took place in Oman for the first time and was attended by oil ministers from Saudi Arabia, Kuwait, the UAE, Russia and the host Oman along with senior officials from other countries such as Libya and Venezuela. “I am happy about it [the meeting].

The solidarity of the agreement will continue and that is what we have achieved. The agreement today was to continue [production cuts] till end of this year. And then the review will be conducted, by all those who signed the agreement, on what needs to be done in 2019,” H E Dr Mohammed bin Hamad al Rumhi, Oman's Minister of Oil and Gas told reporters after the meeting.

Before the meeting, Saudi Arabia's Energy Minister Khalid al Falih urged oil producing nations to extend their cooperation beyond 2018. It is for the first time that OPEC’s largest producer and exporter Saudi Arabia has publicly announced its intention to form a new form of coordination among oil producers after 2018.

“We should not limit our efforts to 2018. We need to be talking about a longer framework for our cooperation,” Falih told reporters. Stressing on the need for extending cooperation, Falih while talking to reporters after the meeting said that the production cuts by OPEC and non-OPEC countries aren’t close to achieving their goal of reducing inventories to bring supply and demand in balance. He said that the balance may not happen until early 2019, indicating that the cooperation might continue beyond 2018.

Falih said due to the combined efforts by OPEC and non-OPEC members total oversupply in the global oil market, which was about 340mn barrels in the beginning of 2017, has been reduced by 220mn barrels. “We have reduce overhang by two-thirds which is a laudable achievement, but one-third of the overhang is still there,” Falih added.

On rebalancing of the oil market, H E Dr Rumhi said, “Nobody really knows when the market would rebalance itself. Different agencies are making different projections, but all of them indicate that towards the end of the year things will be much clearer and hopefully the market would get rebalanced by the end of this year or early next year.”

Oil prices have risen from around US$45 per barrel in mid 2017 to around US$70 per barrel this month because of OPEC and non-OPEC producers' combined efforts to reduce the output by around 1.8mn barrels per day. However, the increase in shale oil production remains a concern for many producers.

On threats of oversupply by US shale oil production, Falih said there are multiple opinions about the growth of shale oil, some are very bullish and others are not. “I believe the growth of shale oil would be moderate one. And the growth in consumption would be there to balance it,” he said.

Russian Energy Minister Alexander Novak and UAE's Oil Minister Suhail al Mazroui expressed confidence that the market could rebalance in 2018, but they didn't rule out the possibility of extending cooperation to next year.