Oil-exporting cartel Opec is confident that production cuts agreed with non-members to prop up prices will lead to a recovery in the market, its chief said on Wednesday.
“We are optimistic that the policy measures we have taken already place us on the path of recovery,” Opec Secretary General Mohammad Sanusi Barkindo said at an energy forum in Abu Dhabi.
Opec members agreed in November to cut production by 1.2 million barrels per day for six months beginning from the start of the year.
Some non-cartel producers, led by Russia, joined in December by committing to cut output by 558 million bpd.
The Opec chief did not take a position on whether oil ministers from participating countries
would extend the cuts when they meet in Vienna next month.
“These 24 countries, I believe, will take a decision that will be in the best interest of not only producers but also consumers and the global industry in general,” he said.
Meanwhile, the International Monetary Fund (IMF) in its latest World Economic Outlook report predicted average oil prices at around $55 per barrel in 2017-2018.
The average price of crude oil amounted to $42.84 per barrel in 2016, reported TASS the official Russian news agency, citing the document. In 2017, the oil price is expected to reach $55.23 per barrel, while in 2018 it may go slightly down to $55.06 per barrel, the report said.
“Despite uncertainty about technological improvements and the recent Opec agreement, rebalancing oil supply in line with demand accompanied
by stable prices, will hinge on the prospects for unconventional sources,” said IMF.
The IMF expects the negotiated reduction in oil production by 1.8 million barrels per day for six months to help rebalance the market by the end of 2017, “eliminating an excess supply currently estimated to be a little less than 1 million barrels per day.”
“Annual oil demand growth, commonly projected at about 1.2 million barrels per day, will be met by unconventional sources over the next few years, mainly through resources under development for deepwater and ultra deepwater oil, oil sands, and heavy and extra heavy oil,” the report said.
Opec and non-Opec producers said after talks in Kuwait last month that they were looking into extending the output cuts, as compliance with the agreement has increased.
UAE energy minister Suhail Al Mazrouei told reporters at the forum that it was “still premature to make any decision” on the cuts.
“The market is correcting itself. So far we have not seen huge fluctuation in the price, which is a good thing,” he said. “We want stability in the market,” he added.
Barkindo said the joint action has put Opec and other producers in the “driving seat” to dictate events instead of “reacting to market developments.”
The cuts were agreed to help restore market stability “by addressing one variable, which is stock,” he said.
“As a result of the rising stock over the past years, the equation has gone out of balance.”
All producers taking part in the cuts are committed to restoring stability, he said.