Ejiofor Alike with agency reports
The Secretary General of the Organisation of Petroleum Exporting Countries (OPEC), Mr. Mohammad Barkindo, has stated that the focus of discussion among the cartelâ€™s ministers that gathered in Vienna, Austria, yesterday was finding a way to stabilise the market over the long term.
In his welcome address at the 2nd Technical Meeting of OPEC and non-OPEC Producing Countries, Barkindo stated that the cartel paid special attention recently to US shale oil production and other non-OPEC regions.
The US government estimates that total production would be around 9.2 million barrels of oil per day for the full-year 2017 average.
According to the estimates, production should jump to 9.8 million barrels per day by 2018, which would beat a 48-year record for the highest annual average in US history.
US shale oil has remained more resilient to the weak price environment than expected, frustrating the OPEC effort to drain the surplus on the five-year average in global crude oil inventories through managed production declines.
However, the effort to extend a deal into late 2018 may be complicated by internal divisions among major parties to the agreement. Russian energy officials had shown ambivalence earlier this month and a rivalry between Iran and Saudi Arabia, two of the lead producers, could also complicate negotiations.
Russia is less reliant on higher oil prices and has typically been keen not to concede too much market share to its rivals.
And with new oil fields set to come online next year, a number of Russian firms have expressed their displeasure over a possible extension of global supply curb.
Russiaâ€™s Energy Minister Alexander Novak â€” a key architect of the output cut deal that was extended last May â€” said in October that Moscow would be in favour of extending the OPEC-led production deal into late 2018 but Novakâ€™s comments were made at a time when the oil price was drifting in the $50 to $55 range.
Oil prices fell more than a dollar yesterday, with US crude easing from two-year highs on prospects of higher supply, and uncertainty about Russiaâ€™s resolve to join in extending output cuts ahead of this weekâ€™s OPEC meeting.
US light crude was down $1.21 or two per cent to $57.74 a barrel while Brent crude oil was down 51 cents or 0.8 per cent to $63.35 a barrel.
Meanwhile, OPEC ministers will on Thursday decide if and how long they would extend an agreement that curbed supply of two per cent of total demand, which was implemented in January, extended once this year into March and could be drawn out for the rest of next year.
â€œThis is beyond attaining short-term market rebalancing, and calls for strengthening our cooperation through a dynamic and transparent framework for sustainable market stability in the medium- to long-term,â€ Barkindo said.
By October, the level of crude oil inventories for the major industrialised economies was around 140 million barrels above the five-year average, a level thatâ€™s more than 200 million barrels below the record high.
Barkindo said the trend lines for all major crude oil benchmarks indicate a market thatâ€™s clearly returning to balance.
â€œAfter reaching record-high levels of more than 380 million barrels over the five-year average, OECD commercial oil inventories have steadily fallen to stand 140 million barrels above the five-year average in October.
Additionally, excess crude in floating storage has been drawn down considerably, by 50 million barrels since June 2017, supported by the shift in the market structure where for the first time since the summer of 2014, all major crude oil benchmarks have flipped into backwardation, signaling clearly a market that is steadily returning to balance,â€ Barkindo explained.