The fog has been cleared ahead of OPEC’s next policy meeting by Saudi Arabia and Russia declaring their support for extending a global deal to cut oil supplies for another nine months, OPEC’s secretary general told Reuters on Friday.
The Organization of the Petroleum Exporting Countries, plus Russia and nine other producers, have cut output by about 1.8 million barrels per day (bpd) to get rid of a supply glut. The pact runs to March 2018 and they are considering extending it.
Saudi Arabia’s Crown Prince Mohammad bin Salman said this week he was in favor of extending the term of the agreement for nine months, following on from similar remarks by Russian made by President Vladimir Putin on Oct 4.
“OPEC welcomes the clear guidance from the crown prince of Saudi Arabia on the need to achieve stable oil markets and sustain it beyond the first quarter of 2018,” OPEC’s Mohammad Barkindo told Reuters on the sidelines of a conference.
“Together with the statement expressed by President Putin this clears the fog on the way to Vienna on Nov. 30.”
“It’s always good to have this high-level feedback and guidance,” Barkindo added, when asked if the crown prince’s comments suggested a nine-month extension of the pact looked more likely.
Reuters reported on Oct. 18, citing OPEC sources, that producers were leaning towards extending the deal for nine months, though the decision could be postponed until early next year depending on the market.
Discussions are continuing in the run-up to the Nov. 30 meeting, which oil ministers from OPEC and the participating non-OPEC countries will attend.
The deal has supported the oil price, which on Friday reached $59.91 a barrel, the highest level since July 2015, but a backlog of stored oil has yet to be run down and prices are still at half the level of mid-2014.
The supply pact is aimed at reducing oil stocks in OECD industrialized countries to their five-year average, and the latest figures suggest producers are just over half way there.
Stock levels in September stood at about 160 million barrels above that average, according to OPEC data, down from January’s 340 million barrels above the five-year average.