Iran, Venezuela sanctions impacts not dire enough to justify easing OPEC oil cuts: Falih
By Rosemary Griffin / Platts
Petroleumworld 03 18 2019
Crude production from Iran and Venezuela has remained resilient in the face of US sanctions, Saudi energy minister Khalid al-Falih said Sunday, so for now, OPEC and its allies "need to stay the course, certainly until June," on their 1.2 million b/d oil cut agreement.
"The fact of the matter is that [Iran and Venezuela] have not declined precipitously -- to the point where we see there are still inventory builds," Falih said in Baku, Azerbaijan, a day ahead of a key OPEC/non-OPEC monitoring committee meeting.
He noted that Venezuela has redirected some of its crude flows to Asia and away from US Gulf refiners, who are practically banned from importing Venezuelan oil due to US sanctions.
"Therefore, the market overall remains supplied with Venezuelan barrels," Falih said. "The overall supply situation remains long and is forecasted to be long for the rest of the year, as far as I see it."
Saudi Arabia will keep its crude production around 9.8 million b/d for both March and April, he reiterated, with exports in both months remaining below 7 million b/d.
But he added that the alliance would continue to manage oil supplies with the objective of market stability, monitoring not only the US sanctions but also uncertain demand from China, India and other growth economies.
"We remain ready to continue monitoring supply and demand and doing what we have to do in the second half of 2019 to keep the markets balanced," Falih said.
Venezuelan production fell to 1.10 million b/d in February, down from 1.16 million b/d in January, according to the latest S&P Global Platts survey of OPEC output, though a recent massive power outage in the country is expected to significantly impact output levels.
Iran, meanwhile, held production steady at 2.72 million b/d in February, unchanged month on month, the survey found, as sanctions waivers the US granted to eight countries to continue Iranian oil purchases help buoy output. The waivers expire in May, and US officials have not said whether they plan to extend them.
OPEC and 10 non-OPEC allies led by Russia agreed in December to a 1.2 million b/d production cut accord that is scheduled to run through June.
Russian energy minister Alexander Novak said the oil market had seen a "significant decline" in price volatility since the deal was agreed.
As for whether the deal should be extended, he said the OPEC/non-OPEC coalition would need to make a decision by May or June.
"We're looking at every change in fundamentals to assess what other actions need to be done," Novak said. "All the sides have confirmed once again that they are committed to the agreement of December, and we will see it all the way through."
Falih has said that his preference is to maintain the cuts beyond their June expiry.
OPEC's own analysis arm said Thursday in its monthly oil market report that oil inventories as of January stood at 2.88 billion barrels, about 19.1 million barrels above the five-year average that the coalition is targeting.
The bloc's next full meetings are April 17-18 and again June 25-26 in Vienna.
A technical committee of OPEC and non-OPEC delegates met Sunday in Baku to assess market conditions, and a six-country Joint Ministerial Monitoring Committee co-chaired by Falih and Novak is scheduled to meet Monday to discuss the supply accord.
Novak, however, will not attend the meeting, as he has a scheduling conflict that requires him to return to Russia, though he arrived in Baku Sunday afternoon to hold bilateral talks with several members of the coalition.
The bloc achieved 86% conformity in February with their agreed 1.2 million b/d in output cuts, a delegate told S&P Global Platts.
That is a slight improvement on January's 83% compliance, and Falih, who has pressured members to adhere to their quotas, told reporters that he was confident that the group's performance "will catch up very soon."
Russia is one of the non-compliant members, reporting last week a February production level of 43.3 million mt, or about 11.34 million b/d, which was above its quota of 11.19 million b/d.
Novak said the country will be in full compliance by the end of March or beginning of April, and that full cuts were delayed by weather and technical factors.
Iraq, another country that has been slow to bring production down in line with its quota, will slash its crude exports in March by 200,,000 to 250,000 b/d from February levels, oil minister Thamer Ghadhban said at the press briefing.
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Story by Rosemary Griffin from Platts / SPGlobal.
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