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Global Oil Market to be Balanced in Early 2017 by Oil Output Cut, Expects Kuwait

Global Oil Market to be Balanced in Early 2017 by Oil Output Cut, Expects Kuwait
Global crude markets will be brought into balance early this year as it is most likely that OPEC and other oil producers will comply fully with a deal to reduce supply, said Essam Al-Marzouk, the Kuwaiti Oil Minister.
Al-Marzouk said Wednesday at a conference in Kuwait City that some countries will increase cuts over the coming months and all producers are “highly committed” to the deal even though they have not yet made the full output reduction agreed to last month.
Saudi Arabia’s Minister of Energy and Industry Khalid Al-Falih said on Monday that out of a pledged 1.8 million, output has been trimmed by more than 1.5 million barrels a day since the deal started this year by the 13 members of Bottom of Form
OPEC and 11 other oil producers. They have exceeded their targets, says Saudi Arabia, Kuwait and Algeria. Global crude price crude prices  have declined by about half from peak levels in 2014 and the participants in the collective cuts are seeking to erase a global glut and shore up crude prices.
A committee to monitor compliance, chaired by Al-Marzouk, agreed this week on how to do so, and comprises of seven of the deal’s participants. The committee will look mainly at production but will also consider exports data, he told reporters in Kuwait.
“The production data for January will come out on February 17 so we will look at the numbers and decide how committed everyone is," he said. "We will not accept any compliance rate other than 100 percent from all producers."
The minister said that Kuwait is assuming a $45 price in its budget for fiscal year 2017-18 and that oil will trade at $55 to $60 a barrel this year. As traders await proof that producers are complying, crude has slipped about 5 percent from an 18-month high of more than $58 a barrel on Jan. 3.
On oil fields Kuwait shares with Saudi Arabia, he expects a “positive development” in the next few weeks, the oil minister said. Both countries have previously stated that any reopening of the fields would not change their commitment to complying with the cuts and production there was halted more than a year ago.
"We are in talks now with Saudi officials on technical issues on how to bring production back in the neutral zone,” he said, referring to the nations’ shared border area. “We need to bring back workers to the fields to start maintenance of wells before we start, so it will take some time before we can bring back production."
The onshore Wafra field and the offshore Khafji field are jointly controlled by Kuwait and Saudi Arabia. Because of difficulties in securing work permits and access to equipment and to unspecified environmental concerns, Wafra has been closed since May 2015 and Khafji since October 2014. The fields can together pump more than 500,000 barrels a day.
Some of the biggest producers in the output cuts may be allowed to raise their output after the supply deal expires at the end of June as they are investing to expand their production capacity.

Christopher J. Mitchell

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