The Sultanate has urged international producers to work in coordination to help sustain resurgent global oil prices that have soared to $70 per barrel for the first time since the calamitous slump of late 2014. The appeal came in a media briefing convened by the Ministry of Oil & Gas ahead of next week’s first ever meeting of OPEC’s 7th Joint Ministerial Monitoring Committee (JMMC) due to held in Muscat. The meeting, set to be held at Grand Hyatt Muscat on January 21, 2018, will be preceded by a Technical Meeting on January 20.
Oman, represented by the Ministry of Oil & Gas, is hosting this maiden meeting in its capacity as a member of the JMMC, a high-level panel that was created in the wake of a landmark pact reached by OPEC and non-OPEC members on December 10, 2016 in curtailing global production. The pact, which saw as much as 1.8 million barrels per day of crude withdrawn from global supply, is widely credited with accelerating the stabilisation of the global oil market culminating in last week’s 3-year high.
Addressing the press briefing, Ali al Riyami (pictured), Director General of Oil & Gas Marketing at the Ministry, said the Sultanate would welcome discussions aimed at securing and sustaining the latest rally in global oil prices at the upcoming JMMC meeting in Muscat. Any deliberations on topics such as “exit strategies”, as bandied about in the international media, will be premature and unhelpful to this goal, he noted.
“This is a routine meeting of JMMC ministers to review the market and hopefully come up with some recommendations on the way forward,” the Director General said. “We would prefer to have coordination, cooperation and continuation on the (global output cut) agreement, rather than discuss about exit strategies,” Al Riyami said.
His comments stem from recent media reports purporting to suggest that some producers — and Russia in particular — would broach the idea of an ‘exit’ from the global pact once prices reach $70 per barrel. The pact presently remains in force till the end of 2018.
“In any event, it is too early to discuss exit strategies,” Al Riyami stressed. “We have just started to see an improvement in oil prices and we hope it will continue. But most importantly, this rally should be sustained over a longer period, and not represent a spike for one month and return to levels seen before. We need to see a continuation of this price increase before talk about other issues.”
Oman and Russia are the two non-OPEC members on the JMMC, which also includes three OPEC members Algeria, Kuwait and Venezuela. JMMC meetings are usually held once every two months primarily in Vienna, Austria although some member states can offer to host these periodical events, as Oman has just done in the case of the upcoming meeting in Muscat, the official said.
Standard topics for deliberation on the agenda, said Al Riyami, include a review of shale oil trends in Canada and the United States, compliance by individual producers in relation to the commitments to curb output, market analysis provided by OPEC, and a general assessment of global production, supply and demand.
Commenting on the recent rally in international oil prices, he said the uptrend was largely underpinned by market fundaments. “Everybody is happy with this price increase. We don’t believe this is a (temporary) spike. If conformity levels (compliance) by producers will be maintained, we believe the average $60 — 65 price trend can be sustained, although we may see some (fluctuations) in the near future depending upon various factors. Basically 70-80 per cent of the price dynamics are driven by fundamentals, while the balance 20-30 per cent is driven by political, geopolitical, weather, production, and other factors.”
As for compliance by producers with the production cuts agreed in December 2016, Al Riyami added: “The levels of conformity are very high. The majority of the countries are working hard to keep the levels very high. Although some of them may have their own internal issues and challenges, conformity varies between good and very good. For the majority of countries, it goes as high as 116-120 per cent, well above the target,” he stated.