Oil prices set to rise as major producers mop up supply glut

Output cuts by Opec and other oil producers are clearing a supply glut that has weighed on crude prices for three years, ministers said at a meeting on Friday to review the pact that expires in March 2018.

The Organisation of the Petroleum Exporting Countries, Russia and several other producers have cut production by about 1.8 million barrels per day since January.

The group is considering extending the deal beyond its March expiry, although two sources said Friday’s gathering was unlikely to make a specific recommendation on an extension.

Ministers on a panel monitoring the pact, comprising Kuwait, Venezuela and Algeria, plus non-Opec Russia and Oman, were meeting in Vienna after oil prices gained more than 15 per cent in the past three months to trade above $56 (Sh5,700) a barrel.

“Since our last meeting in July, the oil market has markedly improved,” Kuwaiti Oil Minister Essam al-Marzouq said in an opening speech at the meeting. “The market is now evidently well on its way towards rebalancing.”

Russian Energy Minister Alexander Novak said Opec and other producers now needed to work on strategy beyond March.

“We need not only to keep up the pace but continue our coordinated joint actions in full, but also work out a strategy for the future, to which we will stick starting from April 2018,” he said, adding oil demand was rising at a “high pace”.

Officials said before Friday’s meeting that the Joint Ministerial Monitoring Committee would consider extending the supply cut pact. But two Opec sources said the ministers were not likely to make a specific recommendation for an extension.

Joint actions

The committee can make policy recommendations for the wider group of Opec and non-Opec producers, which meets in November.

Global oil inventories have shown signs of falling, although Opec-led efforts to cut stockpiles to their five-year average has taken longer than expected. Oil prices remain at only half their level of mid-2014.

Kuwait’s minister said there were a “number of positives” in the market.