The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, yesterday said in Jeddah, Saudi Arabia, that he hoped the crude oil supply cut agreement between the Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC members would be extended until the end of 2019.
OPEC, Russia and other non-OPEC producers, an alliance known as OPEC+, had agreed to reduce global crude oil output by 1.2 million barrels per day (bpd) from January 1, 2019, for six months, a deal designed to stop excess inventories building up in the oil market and crashing prices.
When asked if the deal needs to be extended beyond June, Kachikwu said: "I'm hoping so," adding that "I'm not so much worried about wars. I don't think that will happen... I don't think anybody's going to push to the point of war," when asked about a risk of war in the Middle East. Also speaking ahead of yesterday's scheduled ministerial panel meeting of top OPEC and non-OPEC oil producers, in Saudi Arabia, the country's Energy Minister, Khalid al-Falih, said he recommended "gently" driving oil inventories down at a time of plentiful global supplies, adding that OPEC would not make hasty decisions about output ahead of the June meeting.
"Overall, the market is in a delicate situation," Falih told reporters.
While there is concern about supply disruptions, inventories are rising and the market should see a "comfortable supply situation in the weeks and months to come," he said.
OPEC, of which Saudi Arabia is de facto leader, would have more data at its next meeting in late June to help it reach the best decision on output, Falih said.
"It is critical that we don't make hasty decisions - given the conflicting data, the complexity involved, and the evolving situation," he said, describing the outlook as "quite foggy" due in part to a trade dispute between the United States and China.
"But I want to assure you that our group has always done the right thing in the interests of both consumers and producers; and we will continue to do so," he added.
Russian Energy Minister Alexander Novak also told reporters that different options were available for the output deal, including a rise in production in the second half of the year.
The Energy Minister of the United Arab Emirates, Suhail al-Mazrouei, said oil producers were capable of filling any gap in the oil market and that relaxing supply cuts was not "the right decision".
Mazrouei said the UAE did not want to see a rise in inventories that could lead to a price collapse and that OPEC would act wisely to maintain sustainable market balance.
"As UAE we see that the job is not done yet, there is still a period of time to look at the supply and demand and we don't see any need to alter the agreement in the meantime," he added.
US crude inventories rose unexpectedly last week to their highest since September 2017, while petrol stockpiles decreased more than forecast, data from the government's Energy Information Administration showed on Wednesday.
On its part, Saudi Arabia sees no need to boost production quickly now, with oil at around $70 a barrel, as it fears a price crash and a build-up in inventories, Reuters quoted OPEC sources as saying.
However, Russia wants to increase supply after June.
The United States, not a member of OPEC+ but a close ally of Riyadh, wants the group to boost output to bring oil prices down.
Falih has to find a delicate balance between keeping the oil market well supplied and prices high enough for Riyadh's budget needs, while pleasing Moscow to ensure Russia remains in the OPEC+ pact, and being responsive to the concerns of the United States and the rest of OPEC+, the sources said earlier.
The yesterday's meeting of the ministerial panel comes amid concerns of a tight market. Iran's oil exports are likely to drop further in May and shipments from Venezuela could fall again in coming weeks due to US sanctions.
Oil contamination also forced Russia to halt flows along the Druzhba pipeline - a key conduit for crude into Eastern Europe and Germany - in April. The suspension, as yet of unclear duration, left refiners scrambling to find supplies.
Russia's Novak told reporters that oil supplies to Poland via the pipeline would start on Monday.
OPEC's agreed share of the cuts is 800,000 bpd, but its actual reduction is far larger due to the production losses in Iran and Venezuela. Both are under U.S. sanctions and exempt from the voluntary reductions under the OPEC-led deal.
Oil prices edged lower on Friday due to demand fears amid a standoff in Sino-United States trade talks, but both benchmarks ended the week higher on rising concerns over disruptions in Middle East shipments due to United States-Iran political tensions.
Tensions between Saudi Arabia and Iran are running high after last week's attacks on two Saudi oil tankers off the UAE coast and another on Saudi oil facilities inside the kingdom.
Riyadh accused Tehran of ordering the drone strikes on oil pumping stations, for which Yemen's Iran-aligned Houthi group claimed responsibility.
The UAE has blamed no one for the tanker sabotage. Iran has distanced itself from both sets of attacks.
Saudi Arabia's foreign minister said yesterday that the kingdom wants to avert war in the region but stands ready to respond with "all strength" following the attacks.
"Although it has not affected our supplies, such acts of terrorism are deplorable," Falih said. "They threaten uninterrupted supplies of energy to the world and put a global economy that is already facing headwinds at further risk."
The attacks come as the United States and Iran spar over Washington's tightening of sanctions aimed at cutting Iranian oil exports to zero, and an increased US military presence in the Gulf over perceived Iranian threats to US interests