9-month OPEC+ extension most likely, says Al-Falih

Saudi Energy Minister Khalid al-Falih. (REUTERS/File Photo)
Updated 30 June 2019

9-month OPEC+ extension most likely, says Al-Falih

  • A nine-month extension would mean the deal runs out in March 2020
  • Oil ministers from OPEC meet on Monday in Vienna, followed by talks with non-OPEC oil producers on Tuesday

VIENNA: Saudi Energy Minister Khalid Al-Falih said on Sunday that the Organization of the Petroleum Exporting Countries (OPEC) and its allies led by Russia would most likely extend their oil output-cutting deal by nine months and that no deeper reductions were needed.

“I think most likely a nine-month extension,” Falih told reporters when asked about Saudi preferences.

Asked about a deeper cut, he said: “I don’t think the market needs that.”

“Demand is softening a little bit but I think it’s still healthy,” he said, adding that he expected the market to balance in the next six to nine months.

Russia has agreed with Saudi Arabia to extend the deal with OPEC, Russian President Vladimir Putin said earlier, as oil prices come under renewed pressure from rising US supplies and a slowing global economy.

Demand is softening a little bit but I think it’s still healthy.

Khalid Al-Falih, Saudi energy minister

Oil ministers from OPEC meet on Monday in Vienna, followed by talks with non-OPEC oil producers on Tuesday. 

The US, the world’s largest oil producer ahead of Russia and Saudi Arabia, is not participating in the pact.

The UAE energy minister said on Sunday he hoped for a productive outcome from the Vienna meetings, according to his official Twitter account.

“Confident the alliance will reach a decision that will restore oil market balance,” Suhail bin Mohammed Al-Mazroui tweeted.

A nine-month extension would mean the deal runs out in March 2020. 

Russia’s consent means the so-called OPEC+ group may have a smooth meeting if OPEC’s third-largest producer Iran also endorses the arrangement.

New US sanctions on Iran have reduced its exports to a trickle as Washington seeks to change what it calls a “corrupt” regime in Tehran. 


OPEC sees small 2020 oil deficit even before latest supply cut

Updated 12 December 2019

OPEC sees small 2020 oil deficit even before latest supply cut

  • OPEC keeps its 2020 economic and oil demand growth forecasts steady and is more upbeat about the outlook

LONDON: OPEC on Wednesday pointed to a small deficit in the oil market next year due to restraint by Saudi Arabia even before the latest supply pact with other producers takes effect, suggesting a tighter market than previously thought.

In a monthly report, OPEC said demand for its crude will average 29.58 million barrels per day (bpd) next year. OPEC pumped less oil in November than the average 2020 requirement, having in previous months supplied more.

The report retreats further from OPEC’s initial projection of a 2020 supply glut as output from rival producers such as US shale has grown more slowly than expected. This will give a tailwind to efforts by OPEC and partners led by Russia to support the market next year.

OPEC kept its 2020 economic and oil demand growth forecasts steady and was more upbeat about the outlook.

“On the positive side, the global trade slowdown has likely bottomed out, and now the negative trend in industrial production seen in 2019 is expected to reverse in 2020,” the report said.

Oil prices were steady after the report’s release, trading near $64 a barrel, below the level some OPEC officials have said
they favor.

The Organization of the Petroleum Exporting Countries, Russia and other producers, a group known as OPEC+, have since Jan. 1 implemented a deal to cut output by 1.2 million bpd to support the market. At meetings last week, OPEC+ agreed to a further cut of 500,000 bpd from Jan. 1 2020.

The report showed OPEC production falling even before the new deal takes effect.

In November, OPEC output fell by 193,000 bpd to 29.55 million bpd, according to figures the group collects from secondary sources, as Saudi Arabia cut supply.

Saudi Arabia told OPEC it made an even bigger cut in supply of over 400,000 bpd last month. The Kingdom had boosted production in October after attacks on its oil facilities in September briefly more than halved output.

The November production rate suggests there would be a 2020 deficit of 30,000 bpd if OPEC kept pumping the same amount and other factors remained equal, less than the 70,000 bpd surplus implied in November’s report and an excess of over 500,000 bpd seen in July. OPEC and its partners have been limiting supply since 2017, helping to revive prices by clearing a glut that built up in 2014 to 2016. But higher prices have also boosted US shale and other rival supplies.

In the report, OPEC said non-OPEC supply will grow by 2.17 million bpd in 2020, unchanged from the previous forecast but 270,000 less than initially thought in July as shale has not grown as quickly as first thought.

“In 2020, non-OPEC supply is expected to see a continued slowdown in growth on the back of decreased investment and lower drilling activities in US tight oil,” OPEC said, using another term for shale.