A panel of OPEC producers and independent producers believes the global oil supply has been virtually wiped out, partly due to the FAO-led supply cut agreement that began in January 2017, two sources familiar with the matter said.
One source said that the JCOMM meeting earlier on Thursday found that oil stocks in developed countries amounted to 12 million barrels in March, above the average of five years. That is a drop from 340 million barrels above that average in January.
The stated goal of reducing supplies is to reduce the surplus of oil stocks to an average of five years, but a number of oil ministers said other measures must be taken into account.
Although OPEC is close to achieving the original goal of the deal, there are no indications so far that Saudi Arabia, the world’s largest oil exporter, or its allies want to ease supply cuts.
Three oil industry sources said Saudi Arabia would be pleased to see the price of oil rise to $ 80 or even $ 100 a barrel, a sign that Riyadh would seek to change the supply reduction agreement even though the original goal of the deal was near.
The Organization of the Petroleum Exporting Countries (OPEC), Russia and a number of other producers began to cut supplies in January 2017 in an effort to reduce the stalemate. Producers extended the deal until December 2018 and will hold a meeting in June to review the policy.
Few OPEC sources call for an exit strategy. Most officials are talking about introducing additional stock measures to assess the success of the deal, and about the need to support investment in new production to avoid any supply crisis.
There is an impression that oil prices are not high enough to encourage sufficient investment in crude. Oil traded above $ 74 a barrel on Thursday, after hitting its highest level since November 2014.
After the Technical Committee meeting, the OPEC ministerial oversight committee and independent producers will meet in Jeddah on Friday.
The ministers are expected to discuss a five-year average inventory measure at their meeting on Friday, although the technical committee has made no recommendations, the sources said.
One source said the OPEC Secretariat in Vienna would be commissioned to prepare a study that would include different scenarios for stocks, market fundamentals and risks that could affect market stability, such as possible US sanctions on Iran. Oil rose to $ 73 a barrel.