High-level parleys over the next few weeks will be crucial to restoring stability in the global oil market even as major exporters led by Opec are meeting in Vienna in late November to discuss and finalise a production-cut agreement.
The Organisation of the Petroleum Exporting Countries had agreed last month in Algiers to reduce their production of crude oil to a range of 32.5mn to 33mn barrels per day, Opec’s first output cut since 2008, in an effort to prop up prices.
A high-level technical committee had already been tasked with establishing quotas for individual countries, which will come up before the Opec ministerial meeting in Vienna on November 30.
The meeting of the high-level committee includes Opec governors and national representatives – officials who report to their respective ministers.
Under this, Opec officials and counterparts from non-member producers such as Russia started two-day negotiations in Vienna on Friday on limiting output to curb a global glut that has weighed on markets for two years.
Opec Secretary-General Mohamed Barkindo said the producer group was facing its biggest test yet, but expressed optimism that a final agreement would be reached and ratified during the planned November 30 biannual summit in Vienna.
Since September, oil prices have been buoyed by a tentative deal by the Opec to cut production and pull prices out of a two-year slump. But rising uncertainty over the execution of the plan has, however, seen oil prices fall 2% so far this week.
According to HE the Minister of Energy and Industry, Dr Mohamed bin Saleh al-Sada, also the current Opec Conferencepresident, the global oil market was “currently closest to rebalancing”.
He noted that “continuous downward pressure” on the prices in the last two years had dried-up the liquidity for investment in projects that would secure the required oil supplies. Al-Sada also saw a “pressing need for attracting huge investments” in such projects.”
Saudi Arabia’s Oil Minister Khalid al-Falih said: “Oil markets started moving into balance recently, but we in Opec, along with producers from outside the group, started intense consultations to take the right action to quicken the re-balancing and market recovery.”
Meanwhile, reports from the US suggest there has been a fall in oil inventories in the last two months.
US crude stockpiles at the Cushing (Oklahoma) Delivery Base showed a weekly decrease of 650,000 barrels, traders said, citing data from energy monitoring service Genscape.
Last week, the US Energy Department said domestic crude stocks fell 553,000 barrels, the seventh such decline in the last eight weeks, adding to hopes that a long-awaited market rebalancing is taking place.
Data showed some US oil drillers removed rigs from production for the first time since June this year. Oil services company Baker Hughes said two rigs were cut last week, ending a 17-week recovery in the number supplying the market.