Al-Fuzaia expects OPEC to continue policy beyond June

Nawal Al-Fuzaia, Kuwait’s OPEC governor, in the first public comment on what would be a crucial decision to determine the direction of global oil prices in the second half of the year, said that OPEC is likely to maintain its production policy at a meeting in June,

Many OPEC oil ministers including Saudi Arabia’s Ali al-Naimi have defended the organisation’s November decision not to cut production but instead defend market share and curtail the output of more expensive producers such as the United States.

The accord sent oil prices below $50 per barrel, extending a sharp decline that began in June amid a global glut of crude.

OPEC has said it believes the oversupply, as much as 1.5 million barrels per day, will evaporate as oil demand picks up and US oil production growth slows, with companies drilling fewer wells.

However, should US oil producers prove more resilient than OPEC expects, the glut could persist and even be further aggravated if Western powers and Iran reach a nuclear deal allowing Tehran to increase its oil exports.

A deadline for a framework agreement on Iran’s nuclear programme between Tehran and six major powers is set for this month, with a deadline for a full deal hoped for in June – the same month as the next scheduled OPEC meeting.

Fuzaia said she did not expect oil prices to go below $40 a barrel. Brent crude is currently at about $58.

“It is difficult to predict (the) oil price point because it is not just moving on sentiment – prices are affected by geopolitics, disruption in Iraq, Iran,” Fuzaia said.

She said Iraqi oil production growth was uncertain after severe fluctuations in past months, while the return of large oil volumes from Iran could take longer than expected.

“Yes, there is an increase of production in Iraq, but the situation is still not clear,” she said.

“In Iran it is all linked with how the nuclear file will progress with the West. Even otherwise, I think the production in Iran will increase, but still not increase quickly, because the situation has been affected. The maintenance, recovery in field, bringing new equipment, will all take time.”

Analysts said that even before fresh Iranian barrels return to the market, OPEC and other oil producers will have to face lower oil prices as demand is set to weaken in April-June.