Russian Energy Minister Alexander Novak yesterday said a global pact by the Organisation of Petroleum Exporting Countries (OPEC), Russia and other producers to cut oil output had dampened price volatility and was reducing bloated inventories, stressing that no immediate extra measures were needed to prop up prices.
Russia, the world’s biggest oil producer with capacity of around 11 million barrels per day, agreed under the output deal with OPEC and others to cut its production by 300,000 bpd from its October 2016 level.
OPEC and its allies face a challenge from US shale producers, which ramped up output as oil prices rose from 2016 low.
In addition, Libya and Nigeria, two OPEC members, which were exempted from the cuts, have also pushed up production.
But Novak said it was up to OPEC to decide how to stick to its pledges on cuts while Libyan and Nigerian output climbed.
This is coming as oil yesterday rose about two per cent, making up some of the previous session’s losses after US data showed crude oil and gasoline stocks dropped more than expected.
Brent crude futures were up $1.19 to $48.98 a barrel, a 2.5 percent gain, after settling down 3.7 per cent in the previous session, its biggest daily drop in a month.
Similarly, the US West Texas Intermediate crude futures were up $1.15, or 2.5 percent, at $46.28 per barrel.
The price of oil has tumbled from one-month highs just below $50 as evidence showed rising exports and increased production from OPEC, even as the group has pledged to cut output.
But the Russian minister told Reuters there was potential for an oil price rise from current levels and that $50 to $60 was “fair” value for a barrel, after benchmark Brent fell 20 per cent in the first half of the year.
OPEC and other producers led by Russia agreed to cut production by almost 1.8 million barrels per day (bpd) from January this year to rein in inventories and support prices.
The deal runs to March 2018.
Despite the initiative, oil prices have registered their biggest first-half decline in almost two decades, as OPEC-led supply cuts have been undermined by rising output in the United States and from other producers not bound by the global pact.
The Joint OPEC-Non-OPEC Ministerial Monitoring Committee (JMMC), set up to monitor the global supply pact, meets on July 24 in the Russian city of St Petersburg.
Ministers from Russia, Oman, Algeria, Venezuela, Kuwait and Saudi Arabia, alongside OPEC’s secretary general, are to attend.
Novak said there were no proposals for more nations to be represented at that regular committee meeting, which plans to discuss the deal implementation and the market situation.
The committee had the authority to recommend “any decisions” to participants involved in the pact if needed, Novak said.
While he saw no need for further action, Novak said: “I can’t predict what the proposals could be from (other) ministers.”
The Russian energy minister also said any exit from the global pact at the end of the first quarter would be “smooth”, adding that inventories would have fallen by that stage and demand would be picking up in the second quarter of 2018.
“We are not going – as we discussed with our colleagues – to all hike oil production on April 1 at once,” he said.
“Other OPEC members have also confirmed their interest to exit the deal in a way that any supply increase would follow a demand rise during the second and third quarters,” he added.