'Committed' Opec to carry on with cuts for rest of 2018

Lester Mason
January 13, 2018

Oil markets are set for continued upward correction in 2018, with market fundamentals rather than geopolitics playing a stronger role in boosting prices, the UAE's Minister of Energy Suhail Al Mazrouei said at a forum on Thursday.

Al-Mazrouei's comment could be a hint as to the exit strategy that OPEC may decide to pursue to avoid too big a slump in oil prices when it announces the end of the deal: other OPEC officials have already remarked that the exit would be gradual.

In a bid to support oil prices, OPEC member countries and other oil producers in January 2017 began output cuts aimed at lowering the level of oil inventories in OECD industrialised countries to their five-year average.

"Don't forget that we're in the winter, the season typically where demand is higher". Starting in mid-2014, a slide in global demand combined with a boom in US shale production to severely undercut prices.

"I am confident of the commitment of all of the countries attending" Opec's meeting in November, he said, referring to the group's gathering in Vienna where it agreed to extend historic limits on output until the end of 2018.

"I think there are cyclic events that happen every year on the demand side, and they affect the market".

"There is, of course, a positive market sentiment that we're seeing today ..."

Mr Mazrouei, who assumed the presidency of Opec this year, dismissed the group's concerns over the surging price.

Oil prices were hovering near three-year highs Thursday, supported by a surprise drop in US production as well as lower crude inventories.U.S. "So this group has started something never seen before and they were complying at a hard time and my expectation is that this compliance will continue to be very strong for the full year" he said. West Texas Intermediate crude futures were at $63.51 at 5:30 a.m. London time while benchmark Brent crude futures were trading at $69.11 a barrel. A partial recovery in oil prices coupled with an ongoing all-out diversification drive and the landmark tax reform, will help the UAE economy to gain increased momentum in 2018 to register 3.3 per cent growth.

On Thursday, Mazrouei said OPEC would continue monitoring oil supply growth in the United States and that in order to meet oil demand growth, the market needed shale oil supply.

Experts at FocusEconomics note that the UAE economy remains in strong shape heading into the new year. In the second quarter you could see some softening, some refineries go to maintenance.

"We still have more than 100-million barrels that need to be cleared" from world stockpiles, Mazrouei said.

Other reports by Iphone Fresh

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