Output cuts by OPEC and other oil producers are clearing a supply glut that has weighed on crude prices for three years, ministers said at a meeting on Friday to review the pact that expires in March 2018.
The Organization of the Petroleum Exporting Countries, Russia and several other producers have cut production by about 1.8 million barrels per day (bpd) since January.
The group is considering extending the deal beyond its March expiry, although two sources said Friday’s gathering was unlikely to make a specific recommendation on an extension.
Ministers on a panel monitoring the pact, comprising Kuwait, Venezuela and Algeria, plus non-OPEC Russia and Oman, were meeting in Vienna after oil prices gained more than 15 percent in the past three months to trade above $56 a barrel.
“Since our last meeting in July, the oil market has markedly improved,” Kuwaiti Oil Minister Essam al-Marzouq said in an opening speech at the meeting he is chairing. “The market is now evidently well on its way towards rebalancing.”
Russian Energy Minister Alexander Novak said OPEC and other producers now needed to work on strategy beyond March.
”We need not only to keep up the pace but continue our coordinated joint actions in full, but also work out a strategy for the future, to which we will stick starting from April 2018,” he said, adding oil demand was rising at a “high pace”.
Officials said before Friday’s meeting that the Joint Ministerial Monitoring Committee would consider extending the supply cut pact. But two OPEC sources said the ministers were not likely to make a specific recommendation for an extension.
The committee can make policy recommendations for the wider group of OPEC and non-OPEC producers, which meets in November.
Global oil inventories have shown signs of falling, although OPEC-led efforts to cut stockpiles to their five-year average has taken longer than expected. Oil prices remain at only half their level of mid-2014.
Kuwait’s minister said there were a “number of positives” in the market, including stock levels in industrialised OECD states in August that were 170 million barrels above the five-year average, down from 340 million barrels in January.
He also said oil in floating storage was falling and cited a shift of benchmark Brent prices into backwardation, a market condition in which it is more attractive to sell oil immediately rather than storing it for later sale, indicating tighter supplies.
The Russian minister said ministers would also discuss monitoring exports, although he said the main focus was still on production.
OPEC officials have said exports have a more direct impact on the international supply than production.
The supply pact sets production limits for participating OPEC and non-OPEC states but puts no restrictions on export levels, so some producers have been able to keep exports relatively high by dipping into their stored reserves.
While OPEC-led cuts have started to drain supplies, rising crude prices have encouraged U.S. shale oil producers to ramp up output, filling some of the gap left by the cuts.