The Organisation of Petroleum Exporting Countries, OPEC, Secretary-General, Nigerian-born Mohammad Barkindo, yesterday said that the oil market is re-balancing at a quickening pace, proffering production cuts as the "only viable option" to restore stability.
The price of Brent oil slightly declined to $63.42 down from $63.52, while the United States, Western Texas Intermediate, WTI crude was at $56.67 from $57.74.
Barkindo's assertion came up as OPEC raised estimates for the amount of crude it will need to pump to meet demand next year by 400,000 barrels a day to 33.4 million a day, according to a monthly report Monday from the group.
As that's about 670,000 a day more than OPEC produced in the third quarter, global inventories would diminish further in 2018 if the group and its allies continue to keep supplies restrained. Stockpiles were said to have declined by more than 180 million barrels this year alone, Barkindo said in Abu Dhabi. Output cuts by OPEC and other producers such as Russia and Oman have started to pay off, with Brent crude prices trading close to a two-year high.
OPEC meeting comes up in Vienna on November 30 to review the pact on cuts, which took effect in January, and possibly extend it. Russia, Saudi Arabia and Iraq already signaled they would be open to extending the curbs.
"We are seeing clear indications that the market is re-balancing at an accelerating pace and stability is steadily returning," Barkindo said. "I am certain that if we had not mobilized ourselves when we did, building consensus and jointly taking action in responding to the crisis, the industry would be in worse condition than it is today." OPEC should decide at its meeting later this month whether or not to extend the cuts, United Arab Emirates Energy Minister Suhail Al Mazrouei said in a speech at a conference in Abu Dhabi.
Neighbouring Oman backs prolonging the output limits beyond March and sees producers extending them until the end of 2018, Oil Minister Mohammed Hamad Al Rumhy told reporters. The U.A.E.'s Mazrouei affirmed that view, saying that coordinated cuts by OPEC and suppliers outside the group have helped trim crude inventories from record storage levels. The U.A.E., OPEC's fourth-largest producer, sees no need for the organization to hold an extraordinary meeting in the first quarter of next year, he said.
"I am optimistic about the whole of 2018," which will be a "recovery year" for oil markets, he said in a speech at the Abu Dhabi conference. U.S. shale output, a contributor to the global glut, has responded more slowly than expected to the recent increase in crude prices, he later told reporters. Also, Oman, a member of the producer committee monitoring the cuts, added its support to prolonging them until the end of 2018. The largest Arab oil producer outside of OPEC expects crude to stay above $60 a barrel and sees stable prices next year, Al Rumhy said.