Opec has flexible output target in its production deal to counter rising crude supplies
Opec has a flexible target under its oil-cuts agreement that allows output to rise as much as 500,000 barrels a day higher than the previously announced ceiling, according to the group’s Secretary-General Mohammad Barkindo.
Under its agreement, the Organisation of Petroleum Exporting Countries can collectively pump from 32.5 million to 33 million barrels a day to accommodate “future supply developments,” Barkindo said on Wednesday at a conference in Istanbul. He didn’t elaborate on such future developments.
Opec agreed in November to reduce output by 1.2 million barrels a day to 32.5 million starting on January 1 to clear a global glut. Other producers including Russia joined the deal, which was extended through March 2018.
Their global accord faced “headwinds” in the first quarter and didn’t cause crude stockpiles to decline fast enough, Barkindo said.
The current market downturn is lasting longer than previous slumps, due largely to 700,000 to 800,000 barrels a day of additional supply from the US, he said.
Crude slid into a bear market last month amid concerns that the cutbacks by Opec and allied producers are being partially offset by a rebound in supply from Opec members Libya and Nigeria and by US shale output. Libya and Nigeria were both exempt from the cuts due to their internal strife.
Brent crude, an international benchmark, has dropped 15 per cent this year and was trading on Wednesday at US$48.13 a barrel.
Libya and Nigeria may be asked to cap their output soon in an effort to help rebalance the market, Kuwaiti Oil Minister Issam Almarzooq said on Monday at the same event. Both African nations are expected to send representatives to the next meeting of the Opec and non-Opec Joint Technical Committee, on July 22 in Russia, Barkindo said.