Saudi Arabia, Kuwait sign deal to resume joint oil output

Saudi Energy Minister Prince Abdul Aziz bin Salman, left, with Kuwait’s Emir Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah following the signing of the agreement. (SPA)
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Updated 25 December 2019

Saudi Arabia, Kuwait sign deal to resume joint oil output

  • An agreement on the demarcation of land and maritime borders in the neutral zone also signed

JEDDAH: Saudi Arabia and Kuwait signed an agreement to resume pumping at two major oilfields in a shared neutral zone on Tuesday.

Kuwait’s Oil Minister Khaled Al-Fadhel said on Twitter that the memorandum of understanding signed with Saudi Arabia included “the resumption of production in the divided zone.”

The state-run KUNA news agency reported that the two countries also signed an agreement on the demarcation of land and maritime borders in the neutral zone.

The oil produced in the neutral zone in the border area is shared equally between the two nations.

Khafji, an offshore field, was jointly operated by Kuwait Gulf Oil Co. (KGOC) and Saudi Aramco Gulf Operations, while the onshore Wafra field was operated by KGOC and Saudi Arabian Chevron.

Commenting on the deal, political analyst Dr. Hamdan Al-Shehri told Arab News: “The agreement signed between both the countries — Saudi Arabia and Kuwait — is a step forward.”

It is very important for both countries, he said adding that this step will benefit both sides economically.

“This is the way to solve problems between countries,” Al-Shehri said.

“The Gulf Cooperation Council  countries are always ready to resolve issues amicably through dialogue,” Al-Shehri added.

The resolution of this issue, he said, is a message to the entire world. Tuesday’s agreement comes as oil prices are under pressure due to abundant reserves and weak global economic growth.

The deal could take as much as a year to bring the field back to full capacity. The fields can produce 0.5 million bpd or 0.5 percent of global supply.

Continued soft pricing has prompted the Organization of the Petroleum Exporting Countries (OPEC) and its allies to make deeper production cuts starting next month.

Saudi Arabia pumps just under 10 million barrels per day (bpd), while Kuwait produces around 2.7 million bpd.

Meanwhile, oil prices rose on Tuesday in thin pre-Christmas trading after Russia said cooperation with OPEC on supply cuts would continue. 

US oil major Chevron, which helps operate the fields, said full production was expected within 12 months. Brent crude was up 30 cents, or 0.45 percent, at $66.69 a barrel. US West Texas Intermediate was 23 cents higher at $60.75 a barrel.

OPEC and Russia will continue their cooperation as long as it is “effective and brings results,” Russian Energy Minister Alexander Novak said in an interview.

OPEC and allies agreed in November to extend and deepen output curbs in place since 2017. The reduction of output could see as much as 2.1 million barrels per day (bpd) taken off the market, or about 2 percent of global demand.

Still, OPEC needs to do more to balance the market on a sustainable basis, Bjornar Tonhaugen, head of oil market research at Rystad Energy, said in a note.

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“The OPEC cuts didn’t fully solve the problem — instead they offer a light bandage to get through the first quarter of 2020,” said Tonhaugen.

While OPEC has been cutting production, US producers have been filling the gap, pumping ever greater amounts of crude to reach a record high of about 13 million bpd in November.

That has helped swell inventories with US stocks up about 1 percent this year.

Crude stocks are, however, expected to have fallen by about 1.8 million barrels last week, a second week of declines, according to a preliminary Reuters poll.

The weekly government report on inventories has been delayed by two days due to Christmas.


IMF cuts global growth forecast and flags Middle East security worries

Updated 23 min 9 sec ago

IMF cuts global growth forecast and flags Middle East security worries

  • International economy is receiving significant boost — 0.5 percentage point of growth last year and this year
  • But IMF warns global economy continues to face array of risks

LONDON: The International Monetary Fund (IMF) lowered its global growth predictions for 2020 despite a slightly improving world economy and warned that geopolitical tensions in the Middle East could impact global oil supplies.

It expects world economic growth to accelerate be 2.9 percent last year, rising to 3.3 percent in 2020 and 3.4 percent in 2021.

The IMF released the figures ahead at the World Economic Forum in Davos, Switzerland.

“Rising geopolitical tensions, notably between the United States and Iran, could disrupt global oil supply, hurt sentiment and weaken already tentative business investment,” the IMF said.

The Middle East and Central Asia is expected to record 2.8 percent growth in 2020, slightly lower than the IMF's October outlook and reflecting a downward revision to Saudi Arabia’s oil output following last month’s decision by the OPEC+ group to extend supply cuts.

It expects the region to pick up speed in 2021 with growth of 3.2 percent.

IMF chief economist Gita Gopinath said: “We’ve seen clearly a rise in geopolitical tensions in the Middle East. We still have to see how far this goes. If you look at oil prices the reaction has been fairly muted at this point. We’ve seen some increase of about 3 to 4 dollars in the price of oil but nothing very large.”

Regional tensions have escalated sharply after the killing of a top Iranian commander in Baghdad, triggering Iranian retaliatory attacks.

“Prospects for several economies remain subdued owing to rising geopolitical tensions (Iran), social unrest (including in Iraq and Lebanon), and civil strife (Libya, Syria, Yemen),” the IMF said.

Although overall risks to the global economy have reduced over the year, the IMF warned that outcomes “depend to an important extent on avoiding further escalation” between Washington and Beijing.

It also flagged the possibility of new trade tensions emerging between the US and the EU.

“The reality is that global growth remains sluggish,” said IMF Managing Director Kristalina Georgieva. “We are all adjusting to live with the new normal of uncertainty.”