Mohammed Barkindo, OPEC Secretary-General suggested Monday that the oil group may continue its alliance with Russia and other non-OPEC producers, but stopped short of saying their production cuts should be extended beyond this year’s planned expiration.
The comments come as the U.S. shale boom threatens to box OPEC and its allies into prolonging their cuts to prevent another collapse in oil prices.
“The general consensus emerging is that it’s in the interest (of the) industry and consumers that we should continue within this framework in order to ensure sustainability and stability in the market,” Barkindo said at the CERAWeek 2018 energy conference.
He added that the most recent downturn was the industry’s worst in terms of the negative consequences it had for both producers and consumers, and extending the alliance between OPEC and non-OPEC countries intends to mitigate those effects.
But for now, extending the actual production cuts is another matter.
OPEC hasn’t discussed “at this stage” prolonging the cuts beyond this year, Suhail Mohamed Al Mazrouei, the United Arab Emirates oil minister and OPEC’s president, told Reuters on Sunday, saying lowering oil inventories is still the group’s focus.
Shares of Exxon Mobil closed up 1% on the stock market today. Chevron rose 1.4%, Royal Dutch Shell gained 0.8%, and BP added 1.2%.
OPEC and nonmembers like Russia plan to wind down their agreement to curb production by 1.8 million barrels a day. The production limits are set to expire by the end of the year and have helped ease the global glut of oil supplies and propped crude prices back up.
But the price rebound has also encouraged U.S. shale companies to pump more oil, putting downward pressure on oil prices and threatening to undermine OPEC’s strategy.
Earlier Monday, Fatih Birol, IEA Executive Director said established oil producers like OPEC need to reconsider future production plans, given the huge growth that is projected from U.S. shale in the coming years.
“We cannot ignore the growth coming from shale,” the head of the oil watchdog group said. “It is coming very strongly and will affect behaviors, decisions and strategies of established producers, but others as well. It will affect everybody. In a shale-revolution world, no country is an island.”