(Bloomberg) -- A number of major crude-producing countries reached an initial agreement to extend output cuts, Saudi Arabia’s oil minister said Thursday, as persistently high stockpiles weigh on prices.
OPEC and other major suppliers have failed, after three months of limiting production, to achieve their target of reducing oil inventories below the five-year historical average, Saudi Arabia’s Khalid Al-Falih said at a conference in Abu Dhabi. The producers pledged to reduce output for six months starting in January. Al-Falih didn’t identify or specify the number of countries in the initial deal for an extension.
“Although there is a high level of commitment, we haven’t reached our goal, which is to reach the five-year average,” Al-Falih said. “There is an initial agreement that we might be obligated to extend to get to our target.” Countries participating in the cuts have yet to reach a consensus on prolonging their agreement into the second half of the year, and an extension wouldn’t necessarily be for an additional six months, he said.
The Organization of Petroleum Exporting Countries and other producers including Russia agreed in December to pump less oil in an effort to counter a global glut. Output shows signs of rebounding in the U.S., where explorers have added rigs for the past 13 weeks, data from Baker Hughes Inc. show. OPEC will decide at a meeting on May 25 whether to prolong its pledged cuts into the second half, the group’s Secretary-General Mohammad Barkindo said Wednesday in Abu Dhabi, the U.A.E. capital.
Brent crude has gained about 14 percent since OPEC decided to pare output, and the benchmark grade was 6 cents lower at $52.87 a barrel at 2:49 p.m. in London.
Gulf Cooperation Council countries agreed to push for an extension of cuts in a meeting on Wednesday, Oman Oil Minister Mohammed Al Rumhy said in an interview in Abu Dhabi. The GCC comprises OPEC members Saudi Arabia, Kuwait, Qatar and the United Arab Emirates, as well as Oman and Bahrain. GCC states are participating in the current deal to cap output.
Iran and Venezuela, both members of OPEC, have expressed support for an extension of the production cuts, Al Rumhy said. Iran’s oil minister made a commitment to freeze output at 3.8 million barrels a day for the rest of the year on the assumption the cuts are extended beyond June, Kuwait Oil Minister Issam Almarzooq told reporters in Abu Dhabi.
OPEC and Russia haven’t reached a final agreement on extending output limits, Almarzooq said. Russia is likely to support an extension, a Bloomberg analyst survey shows.