The OPEC Joint Ministerial Monitoring Committee (JMMC) have held their meeting in Jeddah, Saudi Arabia. The committee is in charge of monitoring production cuts of OPEC members and its allies who entered into an agreement to reduce production by 1.8 mbbl/day in an effort for to restore desirable price levels for oil exporters. The sharp drop in oil price was caused by excess oil inventories of the OECD which went well above their five-year average. This was a result of the organisation’s decision in 2014 when OPEC members decided to maintain production levels during the surge of shale oil production. This led to both a significant drop in oil prices to less than $25/bbl with an increased build-up of the OECD oil stockpile above their normal levels. In 2016, the organisation made an alliance with non-OPEC producers including Russia, Oman, and Mexico, and together they entered into a production cut agreement to restore market stability. The agreement proved to be a success as it eliminated most of the oil stockpile surplus and restored price levels to their desired levels for oil producers, despite the increase in shale oil production. Today, ministers from Saudi Arabia, Oman, UAE, and Russia were present at the meeting. Overall, ministers agreed that production cuts were well above 100%, but the Saudi energy minister stated that the mission is not complete as their remains glut in the market of around 300 mbbl. He mentioned that the oil industry will need to add investments in its upstream sector to avoid any future shortage in supply.
The Russian Energy Minister, however, mentioned the possibility of holding future talks to reduce production cuts given the recent significant reduction in inventories and the increase in oil price. The market has reacted and the Brent crude went above $73/bbl while the WTI crude has been above $68/bbl. If inventories continue to decline, then the price may well reach $80/bbl. OPEC stated that there is no target price and production decisions are determined by market stability.
The next JMMC meeting will be held in June during the week of the OPEC biannual meeting in Vienna.