OPEC may need to consider extending its oil-cuts agreement when the group meets in November, as crude markets are taking too long to recover, United Arab Emirates Energy Minister Suhail Al Mazrouei said.
The Organization of Petroleum Exporting Countries, which already prolonged its cuts accord with other major producers through the first quarter of next year, may have to discuss a further extension, Al Mazrouei said in an interview with Bloomberg TV’s Francine Lacqua. Increased output from Libya and Nigeria, which are both exempt from cutting, is complicating OPEC’s effort to re-balance the market, he said.
“It looks like we may need to consider expanding the time horizon” of the output curbs, he said. “But that’s a decision that’s going to be discussed probably in our next meeting in November.” The U.A.E. is the fourth-biggest producer in OPEC, which plans its next ministerial meeting on Nov. 30.
The recovery in crude prices “will drag us into 2018,” he said. “Is it going to be the first quarter or the second half of 2018? We need to monitor that.” OPEC needs more reductions in oil inventories and “some control of production from some of those countries which were not part of the deal,” he said.
Oil slumped into a bear market last month and Brent crude, the international benchmark, is trading at about $48, a gain of less than $2 since the cuts were agreed on last year. While demand will be almost 2 million barrels a day higher in the second half of the year compared with the first six months, according to OPEC estimates, rising supply inside and outside OPEC suggests the cuts won’t put a significant dent in bloated global inventories.
The committee monitoring compliance with the cuts recommended keeping an extension of the agreement beyond the first quarter of next year “as an option, should further action be required for the stabilization of the market,” according to a statement posted on the OPEC website after the committee met on Monday in St. Petersburg, Russia.
Rising supply from Nigeria and Libya, exempted last year from trimming output because of their internal strife, is proving to be a challenge for OPEC and allied producers as they try to counter an oversupply, Al Mazrouei said.
“We need to think of a ceiling or a mechanism for how we control the production from those two countries,” he said. Libya and Nigeria added a combined 440,000 barrels a day of production in the last two months, according to data compiled by Bloomberg. That’s equivalent to about a third of the reductions achieved by fellow OPEC members.