OPEC’s joint ministerial monitoring committee met this week in Jeddah ahead of a full OPEC+ meeting in Vienna in June. As geopolitical tensions flare on a regional and global scale, the agreement by OPEC and its allies to cut production by 1.2mn barrels per day has come into question.
In a statement released by the committee after its meeting, it wrote that “critical uncertainties remain, including ongoing trade negotiations, monetary policy developments and geopolitical challenges.”
Since the latest agreement in December 2018, OPEC has taken a “wait and see” approach, after a turbulent end to 2018. In his opening remarks to the committee, Saudi Energy Minister Khalid Al-Falih said that the market outlook is “foggy”, defined by conflicting signals on supply and demand.
OPEC and its allies hit 168% compliance with the agreed-upon cuts in April, a record high. But in his speech, Al-Falih noted that collective success should not mask individual under-performance. Countries like Saudi Arabia have been largely carrying the weight of the output cuts, while others have been slow to react.
He also brought up the two recent sabotage attempts which hit Saudi oil infrastructure. Although these attacks did not affect supply, ensuring a reliable energy flow out of Saudi Arabia will be key to maintaining market stability.
Al-Falih does not want to make a rash decision, so it seems OPEC will continue monitoring the market until June, when it will make a decision on whether or not to extend its agreement. In media interviews, Russian oil minister Alexander Novak noted that he was open to options including increasing output, if that was what the market required.
Meanwhile, Al-Falih told reporters at the meeting in Jeddah that he recommended gently driving down oil inventories, which he says are a key marker. Still, he said he would not make any hasty decisions ahead of the full OPEC meeting in June.
