OPEC countries are discussing deepening their production cut agreement, Iran oil minister Bijan Zanganeh said Wednesday, even as some members say the recent extension of the deal needs more time to play out.
"The US oil production increase was unpredictable and this increase is more than what OPEC members had foreseen," Zanganeh was quoted as saying by state broadcaster IRIB news agency. "We are in consultation with OPEC members to prepare ourselves for a new decision. But making a decision in this organization is very difficult because any decision will mean an output cut by the members."
Zanganeh, speaking on the sidelines of a cabinet meeting, said he personally felt that OPEC should "wait a while and see how the market will form."
Some members "believe that it's not [been] long since OPEC decided to cut production, and the impact of this decision has not practically kicked in in the market yet," he added.
A meeting of the OPEC/non-OPEC Joint Ministerial Monitoring Committee is scheduled in Russia in late July, with the exact venue and date still to be determined.
The committee, composed of ministers from Kuwait, Russia, Venezuela, Algeria and Oman, is empowered to recommend further cuts or any other adjustments to the deal, as it sees fit, officials have said.
Saudi energy minister Khalid al-Falih and Russian energy minister Alexander Novak, who represent the largest producers in the OPEC/non-OPEC coalition, have said in recent days that they saw no need to change the production cut agreement, with stock drawdowns expected to accelerate in the next three to four months.
The deal calls on OPEC to cut 1.2 million b/d and 10 major non-OPEC countries, led by Russia, to cut a collective 558,000 b/d.
Participants have said the deal is aimed at getting OECD oil stocks down to their five-year average. OPEC's monthly oil market report earlier this month estimated that OECD commercial stocks had fallen in April for the third straight month to now stand at 251 million barrels above the five-year average.
OIL MARKET UNMOVED BY COMPLIANCE
Compliance with the cuts remains high -- in fact it was at its highest in May since the deal began, according to an OPEC source who spoke on condition of anonymity.
OPEC compliance hit 108% in the month, with non-OPEC participants achieving 100%, the source said.
While not all members have cut down to their quotas, other participants -- notably Saudi Arabia -- have exceeded their required cuts, making up for the difference.
Saudi Arabia has cut 110,000 b/d more than required through the first five months of the deal, according to the latest S&P Global Platts OPEC survey, one of six secondary sources used to monitor compliance.
But the market in recent weeks has not rewarded the coalition with price gains, as doubts about the cuts' effectiveness in the face of surging US shale output and stubbornly high US inventories have led to bearish sentiment.
US liquids production has risen 795,000 b/d in 2017 from 2016 levels, OPEC has estimated.
The US' "oil production increase over the recent months is the main reason for the global oil price fall," Zanganeh said.
Production gains from Libya and Nigeria, both of which are exempt from the cuts, also appear to be weighing on prices, along with an uncertain global demand outlook.
