WELCOME MOVE: Non-OPEC member Oman hails announcement by 23-member as a ‘very good achievement’
The Sultanate has broadly welcomed Thursday’s decision by OPEC+ to keep production cuts substantially in place, save for a minimal output increase, as a positive step to help bolster international oil prices.
Ali bin Abdullah al Riyami, Director-General of Oil Marketing at the Ministry of Energy and Minerals, applauded the deal as a “very good achievement” that would bode well for the international grouping’s concerted efforts to stabilise oil markets roiled by a protracted global downturn and compounded by the coronavirus pandemic.
“Given the market circumstances prevailing before the meeting and considering especially the differences of opinion between key members of the DoC (Declaration of Cooperation), I think the outcome was a very good achievement. What has been agreed provides a way forward. It is better than no decision at all,” Al Riyami stated.
Dr Mohammed bin Hamad al Rumhy, Minister of Energy and Minerals, joined by Ali bin Abdullah al Riyami, represented non-OPEC member Oman at the virtual meeting of OPEC+ — an alliance of 23 OPEC and other leading oil producing nations (including Russia).
The grouping reached a decision to ease their current 7.7 million barrels per day (bpd) of production cuts by 500,000 bpd in January 2021, and to review on a monthly basis the need for any further relaxations going forward.
Speaking to the Observer, Al Riyami said the decision effectively translates into a 17-per cent output cut across the board for the alliance partners, including the Sultanate, for January 2021. This compares with a current output cut of 18 per cent per the landmark agreement reached by OPEC+ in April this year.
“The difference between the current agreement and the latest decision on Thursday amounts to one or two percentage points. In effect, all of the participating countries will cut their January 2021 production by 17 per cent pro rata as opposed to 13 per cent agreed in April. For Oman, this will translate into an output reduction of 150,000 bpd in January 2021, compared with 120,000 bpd presently in line with our commitments under the April agreement.”
From the outset, non-OPEC member Oman has staunchly supported efforts by the OPEC+ alliance to rebalance oil markets and help shore up sagging international oil prices.
As part of its commitment to the historic pact reached by the OPEC+ alliance in April, the Sultanate had slashed output by 200,000 bpd for May through July 2020.
It eased to around 160,000 bpd for the August to December 2020 period, and was due to drop further to 121,000 bpd for the remainder of the accord from January 2021 to April 2022.
“With the latest decision, Oman’s commitment to the global production cut will be 150,000 bpd for January 2021, up from 121,000 bpd presently — effectively meaning a difference of about 30,000 bpd,” Al Riyami noted.
But he stressed that the output cut will be reviewed every month to gauge market conditions and assess the need for a revision in the production curbs.
“This may change upward or downward depending upon the market conditions. OPEC+ ministers will meet on a monthly basis to review these conditions and decide on the action required — whether to ease, maintain or strengthen the production cut based on the market situation.”
Significantly, Oman’s support for the latest decision is consistent with its ongoing alignment with OPEC+ efforts to help lift international oil prices, Al Riyami said.
“Our position has been clear from the inception of this alliance between OPEC and other producing nations, known as OPEC+. Together with our colleagues from OPEC+, we supported them in honouring the previous two accords, and were ready to back whatever was the outcome of the latest effort — whether it meant maintaining the status quo, easing the production cuts up to two million bpd, or rolling over the cuts to the first quarter of 2021. Regardless, our position was to support any decision that would take into account market conditions.”
Following news of Thursday’s decision, Oman Crude climbed to settle at $49.41 per barrel on the Dubai Mercantile Exchange (DME), up from $48.33 per barrel a day earlier — a level previously seen on March 6, 2020.