Iraq, Angola Signal Willingness to Extend OPEC Oil Output Cuts

  • OPEC, thanks to Saudi Arabia, exceeded its output cut promise
  • Discussions about extending cuts is premature: Russia’s Novak

Two OPEC members signaled a willingness to extend the group’s production curbs into the second half of the year as the global rally in prices shows signs of stalling.

“We are satisfied somewhat, but we are looking forward for improvement in the price," Iraq Oil Minister Jabbar Al-Luaibi said in an interview at the CERAWeek oil-industry conference in Houston on Monday.

Jabbar al-Luaibi

Photographer: Akos Stiller/Bloomberg

Asked if the Organization of Petroleum Exporting Countries should extend its agreement on output cuts beyond the first half of this year, Al-Luaibi said, “It’s likely we need to." Iraq has “fully" complied with the reductions agreed to last year, he added.

Angola, another OPEC member, supports prolonging the deal as long as necessary, Isabel dos Santos, chairman of state-run oil company Sonangol, said in a separate interview at the conference. The company has no plans to increase capital spending this year or next, and may even lower its budget compared to the last two years, dos Santos said.

Lagging Target

As of the end of February, both Iraq and Angola are lagging behind the cuts they pledged in November, according to a Bloomberg News survey of analysts, oil companies and ship-tracking data. Angola had reached 78 percent of its target, and Iraq was at 58 percent.

OPEC and 11 other major producers agreed last year to slash production, spurring a 17 percent increase in U.S. oil prices during the last five weeks of 2016. The rally stalled this year as U.S. output and supplies continued to grow. In one sign momentum may be petering out, hedge funds last week eased off on bets that U.S. prices will push higher in the coming months.

Benchmark West Texas Intermediate crude bounced between $51.22 and $54.94 in February, the tightest range since August 2003. WTI for April delivery slipped 13 cents on Monday to settle at $53.20 a barrel on the New York Mercantile Exchange.

Crude inventories in the U.S. rose to 520.2 million barrels last week, the most in data going back to 1982, the Energy Information Administration reported March 1. Data showed that American output has increased to the highest in almost a year.

OPEC Declines

Overall, OPEC production fell to 32.17 million barrels a day in February, a 65,000 barrel-a-day drop from January, the first month of the accord, according to a Bloomberg News survey of analysts, oil companies and ship-tracking data. 

The 10 members of the group that pledged to make cuts in Vienna in November implemented 104 percent of those reductions, largely because Saudi Arabia exceeded its own commitments. Iraq’s production dropped by 50,000 barrels to 4.44 million barrels a day, the survey showed.

Russia, the biggest non-OPEC producer to join the deal, feels it’s premature to discuss extending the output cuts, Oil Minister Alexander Novak said during a news conference at CERAWeek Monday. His country has already achieved about half of the reductions it promised and is ahead of plans overall to rein in production, Novak said. Oil prices will likely float between $55 and $60 a barrel this year, he added.

Last year’s agreement, he said, helped avoid “chaos" in the global oil markets. The supply glut that’s held down crude prices for three years would have been eliminated eventually, he told an audience during a presentation at the conference, but only after years of retrenchment that ended in a painful supply shortage. Russia and OPEC continue to communicate about the direction of crude prices, he told the audience.

— With assistance by Mark Shenk

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