With continued rise in global oil inventories, Saudi Arabia says that OPEC must retain responsibility for rebalancing the oil market. This is partly due to major US sanctions recently placed on Iran and Venezuela, which further signal renewed need to expand output cuts through the rest of the year.
For one, Russia is cutting its oil output along with OPEC’s guidelines, cutting production until, at least, June. This is when Washington will clarify its process for reducing oil exports in Iran and Venezuela.
On the other hand, the United States has been aggressively increasing its own oil exports over the past few months while, at the same time, imposing sanctions on both Iran and Venezuela. These policies, then, seem to have introduced new scrutiny over OPEC while the cartel struggles to predict how to balance global supply and demand.
Saudi energy minister Khalid al Falih assesses that inventory continues to build and, as such, it is still necessary to work on balancing the supply, at least until June.
He goes on to say, “We like to remain ready to continue monitoring supply and demand and do what we have to do in the second half,” with some OPEN ministers meeting in Baku (Azeri capital city) to monitor the OPEC+ committee.
Now, OPEC and its allies have managed to reduce output by 1.2 million barrels per day, which is about 1.2 percent of global demand, since January. And this effort has helped to rebalance global oil market, which has also buoyed prices. With that, OPEC is expected to meet in April, and then once again in June, to decide on output policies.
On the other hand, Russian Energy Minister Alexander Novak comments that Moscow and OPEC, alike, have struggled to set a plan thanks to US sanctions. Until April, at the earliest, he says they will not have much information about what could be done.
He said, “Those sanctions are creating negative trends in the market and are completely distorting the supply and demand picture…They are imposed to help sell goods of the country that is imposing the sanctions, and they create uncertainty.”
Although Russia has been slow on the take to cut oil output in line with the January targets, Novak now says that Russia is approaching full compliance. As a matter of fact, the country will be cutting upwards of 140,000 bpd.