Opec ties to oil allies will stretch through 2019

Pic Reuters

Pic ReutersSINGAPORE

However, the increase in shale oil production remains a concern for many producers.

Global oil producers are in agreement that they should continue cooperating on production after their deal on supply cuts expires at the end of this year, Saudi Arabia's energy minister Khalid al-Falih said on Sunday. "I believe the growth of shale oil would be moderate one".

Kuwait's oil minister Bakheet al-Rashidi said Sunday's meeting focused on compliance with the current agreement on output cuts, and discussion of the deal's future was expected to occur in June, when OPEC and other producers led by Russian Federation are next scheduled to meet on oil policy.

The monthly average conformity level for the first year of the Declaration of Cooperation was a remarkable 107 percent, said the JMMC based on the Report of the Joint Technical Committee (JTC). “Explosive growth in the USA and substantial gains in Canada and Brazil will far outweigh potentially steep declines in Venezuela and Mexico.”.

Falih said the global economy had strengthened while the supply cuts had shrunk oil inventories around the world.

Brent crude, the global benchmark, was down 0.1% at $68.52 a barrel, on London's Intercontinental Exchange.

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That would deliver an unsatisfying outcome for OPEC and its allies in 2018.

Oil prices had closed down Friday after the International Energy Agency released its monthly oil market report, predicting USA crude production would climb above 10 million barrels a day this year, surpassing output from Saudi Arabia and rivaling that of Russia-the world's two largest crude producers.

"This year promises to be a record-setting one for the USA", said the Paris-based global energy watchdog in their widely anticipated monthly report.

While the USA gains, there are others that are still suffering.

"The downside might be limited but last week's highs are unlikely to be penetrated unless there is a significant bullish change on the supply front", Tamas Varga, an analyst at brokerage PVM Oil Associates Ltd., said of the recent Saudi rhetoric.

However, neither minister said whether then current production curbs would need to be extended into 2019, although Al-Falih said they should remain in place until the end of the year, as previously agreed. 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. The group predicts stronger growth in demand and a weaker recovery in rival supplies than the IEA, implying a steady drop in inventories through the year. “OPEC's assumption of non-OPEC supply is far too low.”.

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