“After six months, we will review the decision and we want an equilibrium price then, that will bring stability to the oil market. A stable oil market advantageous for countries like India as it can guarantee them future supply,” said Mohammed Sanusi Barkindo, secretary general of OPEC, who was in India to attend India’s flagship hydrocarbon event Petrotech 2016.
Barkindo added, among the non-Opec countries, Russia has already guaranteed a production cut, which will cover 50 per cent of the expected share of non-Opec nations in output reduction. Being the biggest non-Opec producer, Russia committed to cut oil production by 300,000 bpd
An Opec team is set to have a bilateral meeting with petroleum minister Dharmendra Pradhan on Tuesday. “Before deciding on the production cut, we had not taken the view of consumer nations. But we are taking forward the bilateral talks that we started with India last year focussing on the issues that they face as a consumer,” said a senior Opec official.
On Monday, Brent crude oil prices rose above $55 a barrel taking the rally since the decision on cut down to 19 percent for Brent, the highest in almost eight years. At one point the prices were seen at $55.24 a barrel.
When asked about the competition that the Opec countries face from US shale, Barkindo said, “We did this for global economy. Due to a rise in stock level, there is an instability and we want to bring it down to a manageable level to bring back more investments to the sector. We are not in competition with anyone and this is an inter-dependent world.” According to many, the uncertainty in global supply was mainly owed to the increased output from shale oil in the United States.
The production cut will be applicable for six months starting from January as the review is slated to happen in May.