Major oil producers to consider cuts after price slide

The meeting will be attended by key players in the oil industry. (File/AFP)
Updated 11 November 2018
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Major oil producers to consider cuts after price slide

  • Oil prices shed a fifth of their value in just one month after surging to a four-year high in early October
  • Energy ministers of top producers Russia and Saudi Arabia will join other OPEC and non-OPEC officials for the meeting of the Joint Ministerial Monitoring Committee, which oversees production levels

DUBAI: Major oil producers meet in Abu Dhabi on Sunday to consider reverting to output cuts after a sharp slide in crude prices revived fears of a 2014-style crash.
Oil prices shed a fifth of their value in just one month after surging to a four-year high in early October, driven by a combination of factors centered on higher supply and fears of sluggish demand.
Brent crude dropped below $70 a barrel on Friday for the first time since April while the New York’s West Texas Intermediate (WTI) sank below $60 a barrel, a nine-month low.
The United States has upped production of shale oil, while Saudi Arabia, Russia and others have raised supplies of crude amid signs of slowing demand.
The slide also comes during signs of a softer-than-expected impact from US sanctions on Iran oil exports.
“Prices have been falling amid a continued rise in crude supplies from big producers, such as Saudi Arabia, Russia and the US, more than compensating for lost Iranian barrels,” Forex.com analyst Fawad Razaqzada told AFP.
“With the Iranian sanctions not being as severe as initially feared, officials from the OPEC and non-OPEC producers may discuss at the weekend the need to bring compliance back down toward the 100-percent level or risk another 2014-style slide in prices,” he said.
Energy ministers of top producers Russia and Saudi Arabia will join other OPEC and non-OPEC officials for the meeting of the Joint Ministerial Monitoring Committee, which oversees production levels.
The world’s second and third crude producers — after they were overtaken by the United States thanks to shale oil — Russia and Saudi Arabia are the core of an alliance of producer nations that succeeded in solidifying oil prices after the 2014 crash.
Through large production cuts starting at the beginning of 2017, they managed to push up oil prices from below $30 a barrel to over $85 a barrel in October, strongly improving their revenues.
But the producer nations eased the output cuts in June after signs of a tight market and higher prices, allowing hundreds of thousands of extra barrels into the market.
Saudi Arabia raised its production from around 9.9 million barrels per day in May to around 10.7 million bpd in October, according to Energy Minister Khalid Al-Falih.
Kuwait, Iraq, Russia and the United Arab Emirates also boosted their output.
Cailin Birch, analyst at the Economist Intelligence Unit, said a slowing oil demand is beginning to appear in China, the world’s largest importer of crude oil.
“The recent drop in oil prices reflects a combination of factors. For one, signs of slowing oil demand are beginning to appear; the rate of GDP growth in China is beginning to ease,” Birch told AFP.
The meeting, which will also be attended by the oil ministers of Kuwait, Venezuela and host nation the UAE, is not due to make decisions but will most likely send signals.
The JMMC, a technical committee, is expected to make important recommendations on production cuts to a key ministerial meeting in Vienna next month for the OPEC and non-OPEC producers.
Commerzbank, Germany’s second-largest lender, said Friday oil producers must act to prevent a free fall of prices.
“If they fail to signal any intention to reverse the latest increase in production, oil prices threaten to slide further,” the bank said in a note.


Gulf countries strengthen oil coordination amid tensions: Kuwait

Updated 20 May 2019
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Gulf countries strengthen oil coordination amid tensions: Kuwait

  • ‘It is normal amid this escalation that Kuwait and the Gulf Cooperation Council countries take these steps’
  • Kuwait was in ‘constant contact’ with its ally, the US

KUWAIT CITY: Kuwait’s deputy foreign minister said countries in the Gulf have strengthened coordination to provide oil to global markets amid increased regional tensions.
“It is normal amid this escalation that Kuwait and the Gulf Cooperation Council (GCC) countries take these steps,” Khalid Al-Jarallah told reporters late Sunday on the sidelines of a Ramadan sit-down organized by the Iraqi embassy.
“There is cooperation and coordination between Kuwait and the Gulf countries to provide guarantees for oil tankers and continuous supply of energy to global markets.”
Jarallah’s comments come days after sabotage attacks against tankers in highly sensitive Gulf waters and the bombing of a Saudi pipeline — the latter claimed by Iran-aligned Yemeni rebels.
Both attacks targeted routes built as alternatives to the Strait of Hormuz, the conduit for almost all Gulf exports.
The US Fifth Fleet headquartered in Bahrain said the six-nation Gulf Cooperation Council began “enhanced security patrols” Saturday in international waters, in “tight coordination with the US navy.”
Iran has repeatedly threatened to close the strait in case of war with the United States, which earlier this month announced it was sending an aircraft carrier and strike group to the region.
Kuwait’s deputy foreign minister said “tension was escalating quickly” but he remained hopeful.
He added Kuwait was in “constant contact” with its ally, the US.
On Saturday, OPEC giant Saudi Arabia called for urgent meetings of the GCC and the Arab League to discuss recent “aggressions and their consequences” in the region.
The two summits are scheduled to be held in Makkah on May 30.
Jarallah welcomed the kingdom’s invitation, saying Kuwait was keen to take part in discussions on issues “potentially dangerous” to the region.