KUWAIT CITY: Oil markets have already begun to rebalance after strong signs that producers are complying with output cuts, Kuwait’s oil minister, Essam Al Marzouk, said.
“We are confident that rebalancing in the oil markets has already started,” Mr Al Marzouk said at a news conference. “We expect a positive impact on the market by the end of the first quarter of 2017.”
Brent crude was trading at UA$54.88 a barrel on Wednesday, a dip of 3.4 per cent for the year to date. Mr Al Marzouk said that signs indicate that Opec and non-Opec producers who agreed in late November to reduce output by 1.8 million barrels per day “are complying with their commitments to cut”.
The oil minister heads a five-country committee that is monitoring the implementation of the landmark deal. The committee met in Vienna on Sunday and said that compliance with the six-month accord, which took effect on January 1, had been very encouraging. The aim is to reduce a global glut that has depressed oil prices and blown a huge hole in the public finances of producer nations, despite being good news for consumers.
Mr Al Marzouk said that compliance with the cuts “represents a guarantee for the price to recover to levels that encourage investments and ensure that crude stocks return to normal levels”.
The minister said that there have been announcements from several countries including Opec kingpin Saudi Arabia that they have already completed their cuts. Kuwait has also fully complied with the reduction while Russia has cut 100,000 barrels per day in January and plans to extend that to 300,000 bpd soon, Mr Al Marzouk said.
He expected oil prices to range between $55 and $60 a barrel throughout 2017. Meanwhile on Wednesday, the Middle East benchmark dipped amid thin physical trade after most regional refiners had secured their necessary crude requirements ahead of the Chinese lunar new year holidays that begin on January 28.
Trade on the Platts window was brisk after ChinaOil purchased a total of 11 March Dubai partials, all priced at $53.50 per barrel, from Unipec, Reliance, Shell and BP, traders said.
SK Energy also sold five May Dubai partials, all priced at $54.00 per barrel, to Unipec, the traders added. The deals for the March and May Dubai partials mean that the March-May contango was pegged at 50 per barrel, stable from previous sessions.
Most Middle East crude cargoes have been committed, although Abu Dhabi’s Adnoc was still heard offering some January and February supplies of light sour Murban crude, trading sources said.
March values for light sour Middle East crude came under remain pressure after Adnoc began offering prompt Murban supplies following a fire at its Ruwais refinery earlier this month.
The weakness in the Middle East light sour market has also weighed on premiums for Russia Asia-Pacific crude grades. March-loading Sakhalin Sokol cargoes were mainly done at about $4 per barrel premium to frontline Dubai quote on a CFR Yosu basis this month.
ESPO Blend premiums have also suffered as regional refiners often compare Murban with the Russian grade. The Russian producer Surgutneftegaz is likely to have awarded its sell tender for four cargoes due to load in the second-half of March at premiums between $3.50 to $3.70 per barrel to frontline Dubai quotes, about 20 cents per barrel lower than deals for cargoes loading in the second-half of February done last month.
Tender results from PTT’s crude import tender for the Rayong-based IRPC refinery are due to emerge in the coming days as validity for offers expire on Thursday.
Dubai has set its official differential to Oman futures for April at a discount of $0.15 per barrel, the Dubai Department of Petroleum Affairs said on Wednesday.
