Oil Producers Signal Confidence in Managing Supply Disruptions
23 September 2018 - 11:59AM
Dow Jones News
By Christopher Alessi and Summer Said
ALGIERS--Saudi Arabia and Russia began a meeting between OPEC
and non-OPEC oil producers with an early signal Sunday that they
had confidence in the group's ability to manage supply disruptions
and any big price increases.
After nearly two years of close coordination on crude oil
output, the Organization of the Petroleum Exporting Countries--de
facto led by Saudi Arabia--and its allies led by Russia, said
supply and demand in the market had been sufficiently
rebalanced.
"We have achieved the objectives pretty much of what we set out
in 2016," said Saudi Arabian energy minister Khalid al-Falih at the
start of the gathering. "Markets are relatively balanced," he
added.
Mr. Falih also insisted that Saudi Arabia had enough spare oil
capacity--around 1.5 million barrels a day--to meet any shortages
in the global oil market.
The meeting, which is expected to last for hours, comes amid
growing risks to global supply, including from OPEC members Iran,
Venezuela and Libya.
Market concerns over falling Iranian exports in particular have
helped to bolster prices recently, sending Brent crude--the global
benchmark--close to multiyear highs. Buyers of Iranian crude have
begun cutting back imports over the past few months in the run up
to planned U.S. economic sanctions on Iran's oil industry, set to
take effect November 4.
President Donald Trump in May pulled the U.S. out of a 2015
international agreement to curb Iran's nuclear program, triggering
the reinstatement of economic sanctions on the Islamic
Republic.
Analysts have estimated around one million barrels a day of
Iran's roughly 2.5 million barrels a day in exports could be at
risk as a result of the sanctions.
Mr. Trump's decision helped Brent temporarily breach the $80 a
barrel threshold for the first time in 3 1/2 -years in May,
prompting concerns by some producers that prices had risen too high
and could dampen global demand.
Saudi Arabia and Russia in late June engineered a plan to have
OPEC and its partners begin ramping up production this summer after
more than a year of holding back output. The move helped put a cap
on rapidly rising prices, until Brent again temporarily surpassed
the $80 a barrel mark earlier this month as the market refocused on
risks to Iranian supply.
OPEC and 10 producers outside the cartel--led by Russia--first
agreed in late 2016 to hold back production by around 1.8 million
barrels a day starting in January 2017, in an effort to rein in a
supply glut that had weighed on prices since late 2014.
Oil market participants are looking to the Algiers meeting for
signs about whether the Saudis and Russians are prepared to further
ramp up output and fill the supply gap left by Iran.
OPEC has also faced sustained pressure from Mr. Trump to churn
out more oil to keep oil prices lower. "The OPEC monopoly must get
prices down!" Mr. Trump tweeted Friday, as OPEC ministers descended
on Algiers.
Mr. Falih on Sunday that it was "of course not true" that OPEC
was responding to pressure from the president. "We have been
looking at more important aspects, which is adequacy of supply," he
added.
Write to Christopher Alessi at christopher.alessi@wsj.com and
Summer Said at summer.said@wsj.com
(END) Dow Jones Newswires
September 23, 2018 06:44 ET (10:44 GMT)
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