OPEC and allied oil producers will probably extend a deal to limit crude supply but are unlikely to deepen their cuts, Oman’s energy minister said on Monday, as the United Arab Emirates said it was not worried about long-term growth in oil demand.
The Organization of the Petroleum Exporting Countries, plus allies led by Russia, have since January implemented an agreement to cut output by 1.2 million barrels per day until March 2020 in an attempt to boost prices. They meet in December to review production policy.
“Extension probably, (deeper) cuts I think unlikely unless things happen in the next couple of weeks,” the energy minister of non-OPEC Oman, Mohammed bin Hamad al-Rumhy, told reporters at an energy conference in the UAE capital Abu Dhabi.
He said oil demand was improving as trade tensions soften and that Oman was satisfied with current oil prices, which fell more than 1% on Monday amid concerns over the prospects of a trade deal between the United States and China.
“All indications show things are getting better, the fear of recession, the signs of agreement between the U.S. and China are positive,” Rumhy said.
Suhail al-Mazrouei, energy minister of the UAE, the third largest producer in OPEC after Saudi Arabia and Iraq, told the conference that oil demand growth was “reasonable.”
Geopolitical tensions in the Gulf are causing anxiety among oil consumers following attacks on Saudi Arabian oil plants that temporarily halved the output of the world’s top oil exporter, said Indian Oil Minister Dharmendra Pradhan, whose country is the world’s third-biggest oil importer.
Washington and Riyadh blamed common foe Iran, an OPEC member, for the Sept. 14 assault as well as for more limited strikes on Saudi energy assets and tankers in Gulf waters earlier this year. Tehran rejects the charges.
Tensions with Iran have risen to new highs since May 2018, when the United States withdrew from an international nuclear pact with Tehran and reimposed sanctions on its oil exports.
The Omani oil minister, whose country maintains ties with Tehran, said it cost less to engage with Iran than to build up crude stocks for emergencies.
“The way forward is dialog ... Sitting with Iran is something we have been campaigning for a long time and hope it will happen,” Rumhy said at a panel discussion when asked about the possibility of Gulf countries holding talks with Iran.
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OPEC Secretary-General Mohammad Barkindo warned about underinvestment in the global oil industry, although he said the pace had picked up from 2014-2016 when prices slumped.
“What we’ve seen in 2017-18 is only a marginal uptick in investments ... Investors in the industry should be for the long term, not fly in, fly out,” he said.
In its 2019 World Oil Outlook, OPEC said it would supply a diminishing amount of oil in the next five years as output of U.S. shale and other rival sources expanded, despite a growing appetite for energy fed by global economic expansion.
Rising climate activism in the West and widening use of alternative fuels are putting the strength of long-term oil demand under more scrutiny.
“The greener forms of energy will have a higher pace of growth but conventional oil and gas will also grow. Gas will grow more as there is demand for cleaner forms,” Mazrouei said.