A cut in oil supply beyond March is being discussed right now between Saudi Arabia, Kazakhstan, and Venezuela. If it is agreed upon, this decision will extend the oil supply cut that is currently in force and due to expire in March 2018. Readers will remember that the OPEC countries, in cooperation with oil producers, has abided by the decision to cut down daily oil output by some 1.8 million barrels. This was a move adopted to help curb the oil inventories stocked up across the globe and to support oil prices, safeguarding them from sharp dips.
Taking longer than expected
The move to extend the supply limitations beyond the previously agreed upon March 2018 deadline has now been proposed by the Saudi Energy Minister Khalid al-Falih. The supply cut has not been adequate to bring down the global oil inventory at the expected pace. This is one of the main reasons why the Minister is proposing an extension of the strategy. The prices moved up beyond $58 a barrel at the beginning of this year but they have now fallen back to remain within the $50 to $54 range as the oil inventories remain substantial despite the deliberately imposed supply curbs.
Kazakhstan needs to increase Kashagan output
However, for Kazakhstan, this may be a move that is not particularly favorable. The country needs to increase output at its prime Kashagan oil field. To ensure that there are no hurdles to this, Kazakhstan is hoping to barter a solo deal with OPEC that will make space for this supply increase. As of now, it is expected that Kashagan field output will significantly rise during the later part of the current year. It is hoped that a deal that is favorable to all parties will be arrived at, soon.
Venezuela supports oil cut idea
Eulogio Del Pino, the Venezuelan Oil Minister, has supported the idea of leaving options open in the sense that a continuation of the oil supply cut strategy beyond March will be considered if it becomes necessary. He also pointed out that exemptions given to countries like Nigeria and Libya need to be revisited because they have a significant impact on the market. Meanwhile, responding to the possibility of oil supply cut extension, oil prices have edged up while fears of a drastic supply cut are simultaneously being allayed.