ALGIERS – Saudi Arabia and Russia began a meeting between OPEC and non-OPEC oil producers with an early signal Sunday that they had confidence in the group’s ability to manage supply disruptions and any big price increases.
After nearly two years of close coordination on crude oil output, the Organization of the Petroleum Exporting Countries – de facto led by Saudi Arabia – and its allies led by Russia, said supply and demand in the market had been sufficiently rebalanced.
“We have achieved the objectives pretty much of what we set out in 2016,” said Saudi Arabian energy minister Khalid al-Falih at the start of the gathering. “Markets are relatively balanced,” he added.
Falih also insisted that Saudi Arabia had enough spare oil capacity – around 1.5 million barrels a day – to meet any shortages in the global oil market.
The meeting, which is expected to last for hours, comes amid growing risks to global supply, including from OPEC members Iran, Venezuela and Libya.
Market concerns over falling Iranian exports in particular have helped to bolster prices recently, sending Brent crude – the global benchmark – close to multiyear highs. Buyers of Iranian crude have begun cutting back imports over the past few months in the run-up to planned United States economic sanctions on Iran’s oil industry, set to take effect Nov. 4.
President Donald Trump in May pulled the US out of a 2015 international agreement to curb Iran’s nuclear program, triggering the reinstatement of economic sanctions on the Islamic Republic.
Analysts have estimated around one million barrels a day of Iran’s roughly 2.5 million barrels a day in exports could be at risk as a result of the sanctions.
Trump’s decision helped Brent temporarily breach the $80 a barrel threshold for the first time in three and a half years in May, prompting concerns by some producers that prices had risen too high and could dampen global demand.
Saudi Arabia and Russia in late June engineered a plan to have OPEC and its partners begin ramping up production this summer after more than a year of holding back output. The move helped put a cap on rapidly rising prices, until Brent again temporarily surpassed the $80 a barrel mark earlier this month as the market refocused on risks to Iranian supply.
OPEC and 10 producers outside the cartel – led by Russia – first agreed in late 2016 to hold back production by around 1.8 million barrels a day starting in January 2017, in an effort to rein in a supply glut that had weighed on prices since late 2014.
Oil market participants are looking to the Algiers meeting for signs about whether the Saudis and Russians are prepared to further ramp up output and fill the supply gap left by Iran.
OPEC has also faced sustained pressure from Trump to churn out more oil to keep oil prices lower. “The OPEC monopoly must get prices down!” Trump tweeted Friday, as OPEC ministers descended on Algiers.
Falih on Sunday said that it was “of course not true” that OPEC was responding to pressure from the president. “We have been looking at more important aspects, which is adequacy of supply,” he added.