Malabo, Equatorial Guinea — Despite a steady rise in oil prices to nearly five-month highs, OPEC and its allies will not relax their crude production quotas with the market outlook still shaky, the organization's secretary general said Wednesday,
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"While we have seen a marked improvement in market conditions since the beginning of year [and] the market is steadily moving towards a more balanced state, we still believe we need to see inventories levels drop further," Mohammed Barkindo said in a speech at the APPO Cape VII conference in Equatorial Guinea. "We recognize that underlying risk remains, such as ongoing trade negotiations, monetary policy developments as well as the increasingly complex geopolitical challenges in various parts of the world."
OPEC, Russia and nine other non-OPEC partners are in the midst of a 1.2 million b/d production cut that has helped oil prices recover from a massive slump in the last three months of 2018.
The cut agreement is scheduled to run through June, and the coalition is divided on whether it should be extended.
A nine-country monitoring committee co-chaired by the coalition's two largest members -- Saudi Arabia, which wants to extend the cuts, and Russia, which is more circumspect -- is scheduled to meet May 19 to review market conditions. The full 24-country bloc will meet June 25-26 in Vienna to decide the agreement's future.
Speaking to reporters after his speech, Barkindo said the coalition was not overly concerned that it may push prices too high, given the supply and demand risks that still exist, adding that it was more important to prevent a price crash.
"We remain vigilant, this market is becoming increasingly dynamic with heightened uncertainties, therefore OPEC and non-OPEC [producers] have taken a decision to remain focused and ensure that this market does not relapse [as we] we have witnessed in the past," Barkindo said. "We do not have the luxury in today's uncertain world to declare victory, far from it."
US sanctions on OPEC members Venezuela and Iran, which have caused both countries' crude output to significantly shrink, are complicating OPEC's ability to forecast how many swing barrels will be needed to prevent a supply shortage.
The US has threatened to impose tighter sanctions targeting Venezuela's state oil company PDVSA, if President Nicolas Maduro does not step down. Meanwhile, sanctions waivers the US granted to eight countries to continue purchasing Iranian crude are set to expire in early May, with the White House yet to reveal whether it intends to renew them.
Libya also remains unstable, while Algeria is going through a tumultuous presidential transition, after Abdulaziz Bouteflika stepped down late Tuesday amid intense public pressure.
Asked about the situation in Algeria, Barkindo said there was no disruption as yet to the country's crude supplies.
"We do acknowledge that the transition is ongoing," he said. "We remain confident that this transition will be managed well by the leadership and that will not warrant any form of disruption to suppliers."
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