OPEC and non-OPEC countries have made a strong start to lowering their oil output under the first such pact in more than a decade, energy ministers said on Sunday as producers look to reduce oversupply and support prices.
“The deal is a success …All the countries are sticking to the deal …(the) results are above expectations,” Russian Energy Minister Alexander Novak said after the first meeting of a committee set up to monitor the deal.
Ministers said 1.5 million of almost 1.8 million barrels per day (bpd) had been taken out of the market already.
Countries involved in the deal could reduce their output by 1.7 million bpd by the end of the month, Interfax news agency quoted Novak as saying.
Eleven of OPEC’s 13 members along with 11 non-OPEC countries have agreed to make cuts for the first half of the year.
OPEC members Nigeria and Libya, both suffering setbacks in production, were given exemptions.
“The Kingdom [of Saudi Arabia] has taken the initiative and other countries took part in very significant actions,” Saudi Energy Minister Khalid al-Falih told reporters following the meeting.
“Despite demand usually being lower in the first quarter in winter, the actions taken by the Kingdom and many other countries has impacted the market in a tangible way and we have seen the impact in spot prices,” al-Falih said.
Brent oil prices LCOc1 that fell to $27.10 a barrel a year ago have held above $50 per barrel since OPEC producers agreed on Dec. 10 to lower output in the first half of 2017.
The cuts are aimed at reducing a global glut in oil that has weighed on oil prices for more than two years.
Falih said implementation of agreed cuts had been “fantastic” and he hoped for 100 percent compliance in February.
“We will not accept anything less than 100 percent compliance,” Kuwaiti oil minister Essam Al-Marzouq, who chairs the five-member ministerial compliance committee, told a news conference.
The other members of the committee represent Algeria, Venezuela, Russia and Oman.
Venezuela has achieved more than half of its planned 95,000 bpd cut, Oil Minister Nelson Martinez told reporters.
Full compliance could take global oil inventories back close to their five-year average by mid-2017, lowering oil in storage by around 300 million barrels, Falih said.
“[There are] no surprises so far in terms of demand or supply from other sources so there is no reason for us to suddenly come in January and say we need a bigger reduction or a longer period,” he said.
Saudi Arabia is producing slightly below 10 million bpd and has informed buyers of substantial cuts scheduled for next month, he said.
Russia has cut its oil output by around 100,000 bpd, Novak said, double what was originally planned. He said Russian oil production had averaged around 11.15 million bpd this month.
He told reporters it was too early to talk about extending the current deal beyond the planned six months but that remained an option.
“Everyone sees that the agreements on oil production cuts have already have a positive effect on oil markets. The market has become more stable and predictable,” Novak said.
On Sunday it was agreed that a technical joint committee (JTC) would be created comprising a representative for each of the five members of the monitoring committee and as well as the OPEC presidency, which is currently held by Saudi Arabia.
The JTC will cooperate with the OPEC Secretariat in compiling production data which will be presented to the ministerial monitoring committee by the 17th of every month, OPEC said in a news release.
The monitoring committee will communicate after the 17th of every month and plans two meetings ahead of the next ordinary OPEC meeting in Vienna on May 25.
The next meeting in March is set for Kuwait.
Ministers were also keen to highlight that any increase in high-cost U.S. shale oil production as a result of rising oil prices would be absorbed by rising demand.
“We are not worried that production in the U.S. is increasing as prices go up because I think this will be absorbed by an increase in demand,” Al-Marzouq said.
Qatari Energy Minister Mohammed Al-Sada said with increasing demand “shale oil will all be catered for”.
Russia’s Novak also said he was not worried about higher oil output in the United States.
(Writing by Ahmad Ghaddar in London; editing by Jason Neely)