OPEC AND RUSSIA CUTTING
FT - Russia's readiness to back an extension of the supply cuts agreement between Opec and its allies until the end of 2018 has prompted oil ministers to seek widespread support for the proposal, Opec's secretary-general said on Thursday.
Mohammad Barkindo said Saudi Arabia's energy minister Khalid al-Falih and his Russian counterpart Alexander Novak were taking their "cue" from Russia's president Vladimir Putin and "engaging" the other participating countries.
The latest remarks are the strongest indication yet that the production cuts, which came into effect in January and were enacted with the support of the highest authorities in Russia and Saudi Arabia, could be extended until the end of 2018.
"He gave a very pointed answer, which we are taking very seriously — this was the president talking," said Mr Barkindo about the Russian president's comments this month.
When asked how long a potential extension could be, Mr Putin had said: "If we are talking about timeframes, then until the end of 2018 as a minimum."
Speaking to reporters on the sidelines of the Oil & Money conference in London, Mr Barkindo said Mr Falih was on a tour of Opec member countries "to build consensus" while Mr Novak was speaking with nations outside of the cartel.
Oil ministers will meet next month in Vienna.
Saudi Arabia and Russia, countries that produce roughly a fifth of global oil supplies, reaffirmed their pledge to shrink a global oil glut when the leaders of the two energy superpowers met in Moscow early in October.
Mr Barkindo said the supply curbs, alongside robust demand for crude, were helping to reduce global excess oil inventories. "There has been a massive drainage of oil tanks across all regions, in terms of both crude and [refined] products."
Brent crude, the international benchmark, has risen more than 20 per cent since the cuts were first agreed late last year to just over $57 a barrel.
"There is no doubt that the market is rebalancing at an accelerating pace," said Mr Barkindo. "Stability is steadily returning and there is far more light at the end of the dark tunnel."
Opec countries and producers from outside the cartel such as Russia agreed to curb output by about 1.8m barrels a day from January for an initial six-month period. This was later extended until March 2018.
The pact, Mr Barkindo said, had "laid the much-needed foundations" for oil market stability. "It is vital that this platform is not only retained, but built upon," he added.
Mr Barkindo suggested it was unlikely that Libya and Nigeria, which have been exempt from the cuts deal because of conflict in both nations, would be brought into the supply cuts deal next month.
"They still have significant challenges of funding, of security, and other challenges," he said.
Some oil market participants have said increases in output from these countries during this year had somewhat undermined the impact of supply cuts on the oil market. Robust US shale production and poor conformity from several participating members in the deal have also kept a ceiling on prices.
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