OPEC sees the oil market as well supplied and is wary of revisiting a glut next year, the group’s secretary-general said on Thursday, suggesting producers are in no rush to expand a June agreement that raises output.
Oil prices have rallied this year on expectations that U.S. sanctions on Iran will strain supplies by lowering shipments from OPEC’s third-largest oil producer.
Brent crude last week reached $86.74, the highest since 2014.
OPEC Secretary-General Mohammad Barkindo, speaking at the Oil and Money conference in London, said there are many non-fundamental factors influencing the oil market that are beyond oil producers’ control.
“The market has been reacting to perceptions of a possible supply shortage. The market remains well supplied,” he told a briefing.
“The projections for 2019 clearly show a possible rebuild of stocks,” he said of the supply and demand balance for next year.
One of those factors, according to analysts and some members of the Organization of the Petroleum Exporting Countries, has been the decision by U.S. President Donald Trump to re-impose sanctions on Iran.
Trump has demanded that OPEC cool prices by pumping more oil. Barkindo, asked whether Trump’s criticism of OPEC was unfair, said: “The market is currently being largely driven by decisions taken elsewhere – outside OPEC, outside non-OPEC.”
OPEC and allied producers – not including the United States – agreed in June to return to 100 per cent compliance with output cuts that began in January 2017, after months of underproduction in Venezuela and elsewhere pushed adherence above 160 per cent.
Producers have yet to increase supply enough to reach 100 per cent.
Barkindo, responding to a question whether producers needed to go beyond full delivery of the agreement, said they were taking it step by step.
“We have to continue to assess to see how and when we will achieve the 100 per cent conformity and how the market would respond, hoping that some of these non-fundamental factors will evaporate by then,” he said.
“We remain faithful to what we agreed in June.”
OPEC holds its next policy-setting meeting in December.
He said oil producers were worried about spare output capacity amid a reduction in energy-industry investment, given the price rise on fears of a drop in Iranian supply.
“We are very concerned,” Barkindo said in response to a question about spare capacity, citing a continued decline in oil industry investment resulting from a market downturn that began in 2014.
Saudi Arabia, the de facto leader of OPEC, is the only oil producer with significant spare capacity on hand to supply the market if needed.
The kingdom will invest $20 billion in the next few years to maintain and possibly expand its spare oil production capacity, Saudi Energy Minister Khalid al-Falih said.