The Sultanate will back any globally coordinated measure that will help sustain and potentially drive up international oil prices, according to a top official of the Ministry of Oil & Gas. Salim bin Nasser al Aufi (pictured), Under-Secretary, warned that the slight uptick in crude prices witnessed in recent days did not appear to signal a longer-term uptrend. He stressed in this regard the need for producers to “stay the course” in Opec-led efforts to shore up prices. Oman Export Blend crude averaged $55.88 per barrel on Monday.
“I don’t think anyone in his right mind will think this is a trend,” Al Aufi said. “Of course, we welcome the increase in the price, but we know there is pressure in the market that is driving this price increase. I think we need to stay the course, as we are still in a turbulent period.”
Non-Opec Oman is part of an international coalition of 24 producing countries that have agreed to cut a total of 1.8 million barrels per day (bpd) under a deal that came into force last November. Initially envisaged for a period of six months, the production cut has since been extended till the end of March 2018.
While some Opec producers are keen for a further extension of the pact till the end of 2018, others are optimistic that excess oil inventories — blamed for weighing down prices — will be all but wiped out before the March 2018 timeframe, thereby precluding the need for a further extension. A final decision on the issue is likely to take place at Opec’s next meeting in Vienna on November 30, 2017.
Speaking to the Observer, Al Aufi warned that any move to weaken the current production curbs in place would be detrimental to the goal of shoring up oil prices.
“All indications are that we need a longer period (for any price increase to be sustained), and we need the commitment of everybody participating in this initiative to stay the course. Market indicators show that the production curbs are working, although perhaps slower than what we wished.” Discussions at next month’s Opec meeting will likely focus on whether producing nations can “go deeper” in cutting output — a step, the Under-Secretary acknowledged, is not likely to gain traction because “there is not a lot of support for going deeper”, he said.
A key issue for participants at the Opec meeting, he noted, is to weigh the likely ramifications to crude prices when the current initiative is wound down. “When we start to dismantle this initiative, the question is how are we going to do it, and at what pace? At some point in time we are going to (terminate) this initiative, but we don’t want to stop it abruptly,” he stressed.
The Sultanate, he said, would back any agreement that would continue to bolster global crude prices. “Oman is supportive of any initiative that will sustain the current price and increase it as well. Any initiative that promises to keep prices high, and perhaps go higher, then we will definitely support it. At the end of the day, whatever we lose in terms of (export) volume, we will be compensated by higher prices,” he added.
At a conference held in London last week, Opec’s Secretary-General Mohammed Barkindo is understood to have called for entrenching the 24-member Opec and non-Opec coalition behind the landmark pact on cutting production.
Platts quoted the Opec official as saying: “This platform of 24 countries, now hopefully growing, should be institutionalised.” In his speech at the conference, Barkindo said: “At Opec we recognise the importance of institutionalising a framework that builds on this unparalleled global platform of stability. This would go beyond the short-term and look at some of the broader challenges, as well as opportunities, the oil industry is expected to face in the years and decades ahead.”