Oil Tanker - Photo by PT Buana Listya Tama Tbk

JAKARTA (TheInsiderStories) – Delicate situation of oil price made Saudi Arabia recommended oil producer countries to gently driving oil inventories down. It sees no need to boost production quickly now, with oil at around US$70 a barrel, as it fears a price crash and a build-up in inventories.

Saudi Energy Minister Khalid al-Falih also asked OPEC to not make hasty decisions ahead of its next meeting in late June, to help it reach the best decision on output. While, Russian Energy Minister Alexander Novak said OPEC and non-OPEC oil producers ministerial panel had recommended to monitoring the market, due to uncertainties and the recommendations would be made in June.

He said, the option of easing had been discussed and that the oil supply situation would be clearer in a month, including from countries under sanctions.

Starting January and for the next six months, OPEC, Russia and other non-OPEC producers, an alliance known as OPEC+, has agreed to reduce output by 1.2 million barrels per day (bpd), a deal designed to stop inventories building up and weakening prices.

OPEC Sunday’ meeting comes amid concerns of a tight market. Iran’s oil exports are likely to drop further in May and shipments from Venezuela could fall again in coming weeks due to US sanctions.

Previously, Yemen Houthi’ drone targeting to attack two Saudi Arabian’ tankers and main pipe channels is considered not only hitting security, but also world oil supply and global economy.

Iran-backed Houthi’ action is also increasing the heated-already tension in Middle east. Saudi is known as the world’ biggest oil exporter, with 10 million barrels per day (bpd) production and around 7 million bpd export per day.

Its two pumping stations n the east-west pipeline transport five million barrels of crude oil per day, also provide a strategic alternative route for Saudi exports if the shipping lanes from the Gulf through the Strait of Hormuz is closed.

Meanwhile, Saudi tankers Al-Marzoqah and Amjad experienced significant damage in sabotage attacks at the Oman Sea, United Arab Emirates region. Houthi rebels, who have claimed responsible for the attack, stated that the action is a response for Saudi Arabia and its allies.

The attacked was occurred amid the increasing spat between the United States (US) and Iran over nuclear agreement.

Global oil supply in April slightly decreased by 0.07 million barrels per day (bpd) to average 98.82 million bpd, compared with the previous month, the Organization of the OPEC said on May 15.

According to the organization’ monthly oil market report, OPEC’ crude oil production remained marginally unchanged from the previous month to average 30.03 million bpd. However, non-OPEC supply, including OPEC natural gas liquids, decreased by 0.07 million bpd month-on-month to average 68.79 million bpd, up by 2.62 million bpd year-on-year.

The fall in non-OPEC supply was mainly driven by Kazakhstan, Canada, China, and Russia, according to the report. The share of OPEC crude oil in total global production stayed unchanged at 30.4 percent in April compared with the previous month.

Crude oil output decreased mostly in Iran, Saudi Arabia, and Angola, while production increased in Iraq, Nigeria, and Libya. Iran saw declines of 164 thousand barrels per day lowering the overall production figure to around 2.5 million bpd, while crude oil production in Iraq increased by 113 thousand bpd to reach 4.6 million bpd.

Unchanged from last month’ report despite some revisions within the regions, world oil demand growth for 2019 is projected to increase by 1.21 million bpd, to average 99.94 million bpd.

Demand for OPEC crude in 2019 was revised up by 0.3 million bpd from the previous report to stand at 30.6 million bpd. However, it is 1.0 million bpd lower than the 2018 level.

Top exporter Saudi Arabia cut output despite oil prices hitting 2019 high above US$75 a barrel and United States (US) President Donald Trump urging action to lower prices.

Supply losses in OPEC members Iran and Venezuela, both under US sanctions, have deepened the impact of an OPEC-led production-limiting deal. The so-called OPEC+ group of producers meets next month to review whether to maintain the pact beyond June. Vienna-based OPEC trimmed its estimate of oil supply growth from outside the group in 2019 and said the rapid rise in production of US tight oil.

“Supply growth is likely to be slower than last year amid the expected weaker global economic growth. The US tight oil production is increasingly faced with costly logistical constraints in terms of out-take capacity from land-locked production sites” OPEC said.

OPEC, Russia and other non-member producers are reducing output by 1.2 million bpd from Jan. 1 for six months. The producers meet on June 25-26 to decide whether to extend the pact.

OPEC+ returned to output cuts this year due to concern that an economic slowdown would produce a supply glut. But demand has weakened no further for now, as OPEC kept its estimate of global growth in oil use in 2019 steady at 1.21 million bpd.

However, in a development that may raise OPEC concern, the report said inventories in developed economies rose in March, after falling in February. Stocks in March exceeded the five-year average – a yardstick OPEC watches closely – by 22.8 million barrels, more than in February. The report suggests that if OPEC kept pumping at April’s rate it would undersupply the world market in 2019.

The 11 OPEC members required to cut output achieved 150 percent compliance in April with pledged curbs, compared with 155 percent initially reported in March. OPEC estimates it needs to provide an average of 30.58 million bpd in 2019 to balance the market, a figure increased by 280,000 bpd month-on-month partly due to the lower non-OPEC supply outlook.

Written by Staff Editor, Email: theinsiderstories@gmail.com