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Likely Extension Of Oil Supply Cuts Signaled By Saudi Arabia And Kuwait

Likely Extension Of Oil Supply Cuts Signaled By Saudi Arabia And Kuwait
The clearest signal yet that OPEC plans to extend into the second half of the year a deal with non-OPEC producers to curb oil supplies was given out by leading Gulf oil producers Saudi Arabia and Kuwait.
Saudi Energy Minister Khalid al-Falih said on Thursday that even though there is as yet no agreement, consensus is growing among oil producers that their supply restraint agreement should be extended after its initial six-month term.
"There is consensus building but it's not done yet," he told reporters on the sidelines of a conference in the United Arab Emirates. Asked about non-OPEC producer Russia, Falih replied: "We are talking to all countries. We have not reached an agreement for sure, but the consensus is building."
He expected to see an extension of the agreement, said Kuwait's oil minister Essam al-Marzouq, at the same event.
"We have a noticeable increase in compliance from non-OPEC, which shows the importance of extending the agreement," Marzouq said.
"Russia is on board preliminarily ... Compliance from Russia is very good. Everyone will continue on the same level," he said.
Marzouq said that the cuts may become less deep as oil demand is expected to be stronger for seasonal reasons in the second half of 2017 if OPEC and non-OPEC oil producers decide to extend their six-month agreement.
He said that producers were always looking for more non-OPEC members to join the agreement and that OPEC would extend the deal if there was consensus among non-OPEC producers.
Marzouq said, without identifying it that one African country has expressed interest in joining.
To support a price rise that has stalled near $55 a barrel, OPEC is keen that non-OPEC play its part in reducing world inventories. Crude is up from lows last year below $30.
To discuss extending supply curbs with non-OPEC countries that total 1.8 million barrels daily, two-thirds of that from OPEC, the Organization of the Petroleum Exporting Countries (OPEC) meets on May 25.
Falih said there was "an initial agreement" that the oil cuts may need extending to drain high global inventories. He said talks were ongoing.
"Our target is the level of inventories. This is the main indicator for the success of the initiative," Falih said.
They remain stubbornly high in consumer regions, particularly in Asia and the United States even as the inventories held at sea and in producer countries have dropped.
Inventories in industrialised countries were still 10 percent above the five-year average, a key gauge for OPEC, the International Energy Agency said last week.
A "quite high" number of producers favoured extending the supply restraint agreement, Omani Oil and Gas Minister Mohammad bin Hamad al-Rumhy said.
"The number of countries that are supporting the extension I think would be quite high, percentage-wise," Rumhy said.
However, the leader of the nation's Shi'ite ruling coalition Ammar al-Hakim said that Iraq may seek to be exempt and ask to boost its own output.
As the nation needed its oil income to fight Islamic State, Baghdad could ask to be exempted from taking part in the supply curbs, Hakim cautioned.
"Given these sensitive circumstances, it is the right of Iraq to hope for an exemption by the other OPEC member states and have an opportunity to increase its production," Hakim, an influential cleric, said in an interview late on Wednesday.
"But we are with the principle of reducing the overall OPEC supply to lift prices."

Christopher J. Mitchell

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