The price of crude oil slipped in early trading this morning despite hopes that a deal to curb production, due to run out at the end of the year, can be made more permanent.
Facing a plunge in the value of crude, caused by a glut in world supply, 24 countries agreed at the end of 2016 voluntarily to limit production.
These included the 14 member-countries of the energy cartel, the Organisation of Petroleum Exporting Countries (OPEC), and the looser grouping, known as NOPEC, which is supportive of the cartel without joining it. Major NOPEC members include Russia, Mexico, Oman and Sudan.
From a recent low of $27 a barrel in January 2016, the price – supported by the production curbs – has made a strong recovery. This morning, Brent crude, which is used as a worldwide benchmark in oil contracts, was trading at $67.93, 19 cents down on yesterday.
The key US crude, West Texas Intermediate, was trading at $63.32, also down 19 cents on yesterday.
OPEC meets in Vienna on June 22, and statements will be scrutinised for a clearer idea of the organisation’s thinking.
Already, OPEC and NOPEC have established a joint monitoring committee to oversee compliance with the voluntary cuts. In the past, OPEC has been plagued by “quota cheating” as countries have sought to sell more oil while benefiting from the sacrifices of others. However, this time, compliance with the curbs averaged 107 per cent across 2017, according to OPEC Secretary General Mohammad Sanusi Barkindo, meaning that, overall, the countries involved were pumping less oil than permitted under the deal.
Earlier this week, Alexander Novak, Russia’s Energy Minister, suggested a more permanent OPEC-NOPEC body than the monitoring committee could be established when the current arrangements expire. The OPEC meeting June 2018 would provide an opportunity for the cartel and its NOPEC partners to flesh out their ideas on this point.
Because of the powerful position any permanent or semi-permanent OPEC-NOPEC body would occupy on the world energy scene, OPEC meeting news will be closely studied for signs as to how far advanced such plans may be.
This declaration, he said, was “one of the most innovative enterprises ever known in the history of oil”, adding that the voluntary output curbs “have been indispensable for returning a degree of stability to the oil market”.
In all, Mr Barkindo said, the deal had been “transformative”.