Crude sideways early Fri, awaiting word from Jeddah - 20 Apr 2018
- Crude futures were hovering close to their Thursday’s settle early Friday in Asia, as the market awaited news from a meeting of the Joint OPEC/non-OPEC Ministerial Monitoring Committee in Jeddah, Saudi Arabia, expected in a few hours’ time.
- The JMMC, which comprises three OPEC members — Algeria, Kuwait and Venezuela — and non-OPEC members Oman and Russia, is primarily responsible for taking stock of the producers’ compliance with their commitments under the November 2016 production cut agreement. The committee, represented by the energy ministers of its member countries, met six times through 2017. The meeting in Jeddah is its second this year.
- The Jeddah meeting has acquired special significance in view of the following recent developments:
- Crude futures have climbed to a fresh 40-month peak, with Brent supported well above $70/barrel. At the time of their November 2016 output cut deal, ministers had said they saw crude in a $60-70/barrel band as reasonable for both producers and consumers.
- The surplus of OECD oil inventories to their five-year average had shrunk to 30 million barrels at the end of February as per the International Energy Agency and 50 million barrels as per OPEC, according to their latest monthly market reports released last week. That has brought the target of the OPEC/non-OPEC cuts within sight.
- OECD oil stocks could return to their five-year average levels — the official target of the OPEC/non-OPEC cuts — before mid-year.
- OPEC and its non-OPEC partners will now need to decide whether they should amend their OECD inventory target (there have been some discussions around changing it to a seven-year average, which would mean continued draining of inventories) as well as weigh the possible impact of continuing with their cuts to the end of 2018, as currently scheduled.
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