UAE Joins Gathering Consensus to Extend Oil Output Cuts

Andrew Cummings
November 14, 2017

But the tensions in the Middle East have raised the prospect of disruptions of crude oil supply, though the price of Brent was steady yesterday at $63 per barrel, close to its two-year high.

"The excess of OECD oil inventories over their five-year average levels has fallen by more than 50 percent in 2017, with inventories now at around 160 million barrels".

Speaking yesterday at the Abu Dhabi International Petroleum Exhibition Conference (ADIPEC), al-Mazroui said his prediction was that OPEC would continue to do what it would take to rebalance the market.

OPEC members were reportedly forming a consensus around extending by nine months their production cuts deal with other crude exporters.

In the 12 months between November 2016 and November 2017, several things that used to be just suspicions or suggestions became evident: that OPEC is no longer the master of oil markets, capable of swinging prices higher or lower whenever it fancied; that USA shale is here to stay and grow; and that, were it not for demand growth and the latest developments in the Middle East, Brent would never have returned to $60 a barrel exclusively as a result of OPEC's production cut efforts.

Reuters reported last month, citing OPEC sources, that producers were leaning towards prolonging the agreement until the end of 2018, though the decision could be postponed until early next year depending on the market. "We are not going to meet in that quarter unless it is extraordinary", Mazroui said at an energy industry conference.

Crude oil prices traded in a narrow range on Monday as investors weighed the prospect of supply disruption in the Middle East supporting a further rally in crude prices against expectations that US producers will ramp up output. The group is expected to agree an extension of the cuts beyond their current expiry date in March 2018.

So far in 2017, Brent has averaged at $54.5 per barrel.

Also, OPEC sees no reason for investors to expect oil to hit peak demand before 2040, the organization's secretary general said Monday.

The rig count is also much higher than a year ago when only 452 rigs were active, indicating that the USA oil industry is comfortable operating at current prices.

Regional concerns in the Middle East include the war in Yemen and growing tensions between Saudi Arabia and Iran.

At the time of writing, Brent crude oil prices were trading 0.54 per cent lower at $62.82 per barrel while United States benchmark West Texas Intermediate (WTI) prices were down 0.48 per cent at $56.49 per barrel.

Bahrain said Iran was behind an explosion in its main oil pipeline.

Other reports by iNewsToday