Oil prices rose above $80 a barrel, two weeks before US sanctions, that might stop Iran's oil supplies, enter into effect.
Saudi Energy Minister Khalid al-Falih said on Monday that the Organization of the Petroleum Exporting Countries (OPEC) is negotiating with oil countries of OPEC+, led by Russia, to reach a framework for cooperation and coordination between the two sides without a time limit.
Falih added that it is possible to reach the new agreement during the meeting scheduled in Vienna on December 7.
The minister indicated that the agreement starts in January 2019 and will allow oil countries to intervene to re-balance the market in any appropriate time from January onward.
“I think, Russia will have to take the lead. Total non-OPEC participation is 20 million barrel per day (bpd), but Russia alone gives 11 million bpd. So obviously Russia is a heavyweight both in terms of production and in terms of political influence,” noted Falih during an interview with TASS agency.
Asked whether he has any objectives in mind for the deal signed in December and whether supply will be cut or increase for a certain period, Falih admitted there are many uncertainties about 2019 that it is very premature to say what will be done.
“The only certainty for 2019 is that we need to be ready to act promptly and effectively. We would like to do it in a coordinated way,” said the minister adding that if OPEC and OPEC+ work together, they can quickly act to adjust production.
On whether OPEC and OPEC+ can fill the gap in case Iran left the oil market following US sanctions, Falih indicated that Saudi Arabia had increased its production a lot since June to reach 10.7 million bpd.
“At the same time, our friends from Russia and UAE have increased production as well. So our spare capacities for the entire globe at the moments are much less today than they were back in the past,” the minister told TASS.
Saudi Arabia has 1.3 million bpd of spare capacity, said Falih, adding that UAE has assured they have over 200,000 bpd remaining.
“But we do not know what is going to happen in other countries. We know Kazakhstan plans to increase production and Brasil is expecting to increase production. And US shale could bring an additional volume of oil. So it may happen that we may not need to use spare capacities,” noted Falih. However, he stated that if other countries decline, in addition to the full application of Iran sanctions, Saudi Arabia may be forced to pull all spare capacities.
He stressed that Saudi Arabia is a very responsible country, and for decades, has used its oil policy as a responsible economic tool and isolated it from politics.
“My role as the energy minister is to implement my government’s constructive and responsible role and stabilizing the world’s energy markets accordingly, contributing to the global economic development,” explained Falih.
Asked whether there are enough opportunities, and enough capacities to keep the oil market balanced, to avoid sending prices soaring to over $100 per barrel, Falih replied that he can’t give guarantees,” because I cannot predict what will happen to other suppliers.”
“We have sanctions on Iran, and nobody has a clue what Iranians export will be. Secondly, there are potential declines in different countries like Libya, Nigeria, Mexico and Venezuela,” noted the minister.
At 9:00 GMT on Thursday, Brent crude rose 45 cents to $ 80.23 a barrel, while US crude futures rose 31 cents to $69.43 a barrel.
US sanctions on the oil sector in Iran, the third-largest producer in OPEC are set to start on November 4.
The executive director of the International Energy Agency (IEA), Fatih Birol, said on Monday that other producers may struggle to fully make up for the expected Iran disruption and that oil prices could rise further.
