The deal led by the Organisation of Petroleum Exporting Countries to cut 1.2 million barrels per day from the start of this month should bring balance back to the oil market in the first quarter of 2019, the UAE’s Energy Minister, Suhail al-Mazrouei, has said.
“As we start a new year, I remain optimistic towards achieving the market balance during the first quarter after [the] OPEC and non-OPEC production cut. At this time last year we remember the same pessimistic views which we disagreed with and as we expected 2018 was a good year,” he said in a tweet on Tuesday.
The minister said last month that OPEC and non-OPEC producers would consider “deeper cuts” if the reduction wasn’t enough to restore balance, S&P Global Platts reported.
Algeria’s Energy Minister, Mustapha Guitouni, said late last month that he was confident oil prices would return to between $65 per barrel and $70 per barrel by April, but stressed the OPEC alliance would cut production further if the market had not responded by then.
The oil exporting alliance, which includes OPEC, Russia and other allies, has been vocal in trying to talk up a Brent crude market, which briefly dipped below $50 per barrel in late December after peaking at $86 in October. The group plans to meet in April to assess market conditions even though the current agreement is scheduled for six months as weakening market fundamentals and sharp volatility cast a shadow over policy making.
Russia’s Energy Minister, Alexander Novak, said late December that the OPEC-led alliance should avoid a hasty reaction to recent fluctuations in oil prices and instead continue to monitor the market.
OECD oil stock levels rose above the five-year average in October for the first time since March, to 2.872 billion barrels, reflecting recent production surges, and led by an unusually strong build in crude stocks, the Paris-based International Energy Agency noted in December.
The monthly increase in crude stocks, at 46.4 million barrels, was the largest since March 2015 and reflected steep falls in refining in the US and Japan, higher North American crude output, and steady crude imports in Japan and South Korea. Stock levels have served as an important guide for OPEC in its quest to bring about market balancing.