& Tobago

Very usefull links


News links




Dow Jones

Oil price



Views and News




Opec+ Baku deliberations complicated by US sanctions


By Argus

Petroleumworld 03 19 2019

Opec and its non-Opec partners are holding their first Joint Ministerial Monitoring Committee (JMMC) of the year in Baku today, with divergent views emerging on the need to extend the current output restraint agreement beyond its expiry at the end of June.

Saudi Arabian oil minister Khalid al-Falih has warned that the group, known collectively as Opec+, still has plenty of work to do to return balance to global oil markets, once again signalling that the alliance may need to extend its production restraint deal beyond the first half of this year. But others in the 25-country coalition appear less keen to commit to the idea of an extension, in part because US sanctions on member countries Iran and Venezuela are distorting the near-term market outlook.

Russia, among others, argues that Washington's lack of transparency over its implementation of sanctions on Iranian oil exports last November led to a more than $20/bl drop in prices after waivers were granted at the last minute to eight buyers for a significant 1mn b/d. The US must decide whether to extend waivers to buyers at the end of a 180-day period. The deadline for the US decision on sanctions is 3 May, after the producer group's next scheduled extraordinary ministerial conference on 17-18 April.

The current conflicting views could potentially set up a series of difficult negotiations among members as they decide on their next steps, at the planned April and June ministerial Opec and non-Opec meetings in Vienna.

To avert dissension among member countries over the divisive issue of US sanctions, Saudi oil minister Khalid Al-Falih announced before the start of the closed-door JMMC a new item on today's agenda — whether or not to recommend to the full 25-member alliance cancelling the upcoming April ministerial meeting. April could be too early to make any production decisions for the second half of the year, given the lack of clarity on US policy on Iran sanctions, he said.

This would allow time for the group to assess the market impact of whatever decision the US ultimately makes about sanction waivers in early May, and leave a final decision on whether to extend the current production agreement for the next ministerial meeting scheduled for late June in Vienna.

The JMMC reviews the market outlook and makes recommendations to the full ministerial conference on the group's production policies aimed at rebalancing global oil markets.

The sanctions issue aside, there are also conflicting views on the state of the market. Some members of the alliance, including Russia, believe the market is already balanced while others, such as Saudi Arabia, see rising inventories. "We have always disagreed with the Opec secretariat technical board," al-Falih said. "They don't have a monopoly on technical analysis. We are seeing inventories building. Our target has always been to bring inventories to a normal level.

"My assessment is that as we gather today… the job still remains ahead of us," al-Falih said. "We are nowhere near complete in terms of restoring the fundamentals."

And despite continuing sanctions-related supply disruptions in Opec producers Iran and Venezuela, al-Falih said he still sees OECD inventories, particularly in the US, beginning to rise. "We have been observing production and exports from Iran and Venezuela. And the fact of the matter is that they have not declined precipitously, to the point where we see that there are inventory builds from late in the fourth quarter 2018 and still into 2019," he said.

Al-Falih noted that "the overall supply situation remains long for the first quarter, and is forecast to stay long for the rest of the year. We need to stay the course, certainly until June. But we remain ready to continue monitoring supply and demand, and doing what we need to in the second half of 2019 to keep the markets balanced."

Russian energy minister Alexander Novak echoed his Saudi counterpart, saying that the group is looking at market fundamentals to decide what to do beyond June. But he stopped short of suggesting whether an extension will be required.

Novak said that the uncertainties caused by US sanctions on Iran and Venezuela make it exceedingly difficult for the group to decide before May or June what action, if any, is needed for the second half of the year. "It is clear that the sanctions have had an extremely negative and long-term impact on the market," Novak said. "We all remember the [price] fall of 2018, and remember how sanctions on Iran caused the market to collapse by almost $20/bl in a matter of months. We don't know what will happen in April, and that is something that prevents us to make any viable decision for the second half of 2019."

The US State Department is still weighing up the possibility of renewing some of the Iranian sanctions waivers when they expire on 3 May.

Compliance set to rise

Overall compliance by the countries participating in the output restraint agreement was close to 90pc in February, up slightly on January, al-Falih said. This would "easily" exceed 100pc in March, he said. Under the latest iteration of the "Declaration of Cooperation", agreed in December, Opec pledged to cut 810,000 b/d to 25.94mn b/d in January-June, while the non-Opec participants committed to a cut of 380,000 b/d to 17.91mn b/d. Combined, the alliance would cut 1.2mn b/d to 43.84mn b/d.

But, while this indicates near perfect compliance by the group in February, much of it comes down to Saudi Arabia making higher than called for cuts under the new agreement. Al-Falih said Riyadh will produce around 9.8mn b/d in March and slightly lower than this level in April. That is a sharp 500,000 b/d below the country's production target of 10.31mn b/d. Saudi exports are expected to average 7mn b/d in March and around 100,000 b/d lower than this in April.

The Saudi cuts have offset over-production by other producers participating in the agreement, including Iraq, Russia, Azerbaijan, and Kazakhstan. Al-Falih noted that the countries "are facing ramp-down situations within their industry, so to offset it we sort of went the extra mile". But "obviously, that is not an indefinite compensation that is going to continue", he said.

In a number of bilateral meetings held yesterday, al-Falih said some of the countries with low conformity levels have all recommitted to adjusting their production lower, in line with the targets. "I have met with each and every one of them — they have all assured me that they are on their way in a very short order, to catch up on their commitments," he told a press briefing.

Iraq's oil minister Thamir Ghadhban, also in Baku for the meeting, reiterated his country's commitment to the production cuts after poor compliance with its allocation in January and February.

"There was a decision by us to have strict adherence to what we agreed to," he said. "And in March, in the last 16 days, we have closed tightly our exports and we reduced it significantly — at least 200,000 b/d or 250,000 b/d less than in February. So we expect more adherence and better conformity in March."

Iraq, which pledged to cap its production at 4.51mn b/d in the first half of this year, produced 4.625mn b/d in the first two months of the year, according to Argus estimates. Iraq's compliance will rise significantly this month as the country takes some production offline at a number of its fields, Ghadhban said.

Russia's Novak said Moscow will be in full compliance with its commitment by the end of March or early April.

"When signing the agreement in December, we clearly communicated that it will take us a couple months to reach the targeted level," Novak said. Throttling back production in Russia is more complex because winter weather creates a number of factors that need to be taken into account.

"We need to apply special techniques," Novak said. "We need to shut down fields and we need to be careful not to destroy the potential of our fields." And "besides, we don't have one or two companies operating, we have close to 200 companies in our oil and gas space, which also means a special effort is needed to achieve our mentioned targets," he said.

Kazakhstan's oil minister Kanat Bozumbayev said his country cut production significantly in the second half of March and will remain at these lower levels for the rest of the 6-month period.



We invite you to join us as a sponsor.

Circulated Videos, Articles, Opinions and Reports which carry your name and brand are used to target Entrepreneurs through our site, promoting your organization’s services. The opportunity is to insert in our stories pages short attention-grabbing videos, or to publish your own feature stories.



Story from Argus Media. 03 18 2019


Hit your target - Advertise with us

PW 300.000 plus request per week

Copyright© 1999-2019 Petroleumworld or respective author or news agency. All rights reserved.

We welcome the use of Petroleumworld™ (PW) stories by anyone provided it mentions as the source.

Other stories you have to get authorization by its authors. Internet web links to are appreciated.

Petroleumworld welcomes your feedback and comments, share your thoughts on this article, your feedback is important to us!

We invite all our readers to share with us
their views and comments about this article.

Write to

By using this link, you agree to allow PW
to publish your comments on our letters page.

Any question or suggestions,
please write to:

Best Viewed with IE 5.01+ Windows NT 4.0, '95,
'98,ME,XP, Vista, Windows 7,8,10 +/ 800x600 pixels

Twitter: @petroleumworld1




Editor & Publisher: Elio Ohep/
Contact Email:

CopyRight © 1999-2019, Paul Ohep F. - All Rights Reserved. Legal Information

PW in Top 100 Energy Sites

CopyRight©1999-2019, Petroleumworld ™  / Elio Ohep - All rights reservedThis site is a public free site and it contains copyrighted material the use of which has not always been specifically authorized by the copyright owner.We are making such material available in our efforts to advance understanding of business, environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have chosen to view the included information for research, information, and educational purposes. For more information go to: If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission fromPetroleumworld or the copyright owner of the material.