The output cut deal between OPEC and non-OPEC oil producers that was last week extended for a further nine months is a “work-in-progress” and could be broadened to include the implementation of caps on further countries, according to the oil cartel’s secretary general.
“We are continuously reviewing market fundamentals and you cannot at this moment rule out any further policy decisions,” OPEC’s Mohammed Barkindo told CNBC in St. Petersburg on Thursday.
Brent finished lower in May for a fifth consecutive month with WTI also declining for the third month straight. By 12:20 p.m. London time on Thursday, both commodities were trading mostly flat for the session with Brent 0.04 percent higher at $50.77 per barrel and WTI 0.35 percent higher at $48.49.
Acknowledging the market’s recent volatility, Barkindo noted that in addition to reducing oil stockpiles to near five-year average levels, a key aim of the deal was to reduce the amount of pricing instability.
“The level of volatility in the market has been of concern not only to us in OPEC but also to the non-OPEC as well as the consuming countries … I think going forward we are on course – along the way, you may have some bumps here and there as a result of other factors that may not necessarily be related to the fundamentals – but in general we are on course to achieving our objectives,” he stated, before adding that this would not deter signatories from persisting with the agreement.
“It (the volatility) is largely I understand due to some automated trading models and some expectations on what we should do or should not do but we will not be disrupted because we firmly believe that the extension of the declaration of cooperation to the first quarter of next year is in the best interest of all producers and consumers and you can see that the fundamentals are gradually but steadily improving,” the secretary general declared.
Barkindo highlighted the decision last year by Saudi Arabia’s Minister of Energy, Khalid Al-Falih, and his Russian counterpart, Alexander Novak to come together in China and cooperate in an attempt to drum up a fix to address the challenges faced by producers. Barkindo said this was the turning point for the oil market.
He emphasized both sides’ continuing active commitment and determination to resolving the market’s instability as critically important to all producing countries.
“On the whole, I am more relaxed now than I was a couple of months ago and I think under the umbrella that they are providing to both OPEC and non-OPEC, we remain on course,” offered Barkindo before stressing that the key question for him and those involved were not pricing levels themselves.
“The oil price has not been our focus, as you know – as a matter of policy. We focus on fundamentals and we do not want to be distracted from that in order to stay on course,” he clarified.