Facing the loss of output from two member states, OPEC and its partners meet this weekend in Azerbaijan to assess the progress of their agreement to hold back oil from the market.
OPEC Secretary General Mohammad Barkindo was attending the annual IHS Markit CERAWeek conference in Houston this week and said the meeting in Baku will set the stage for what happens at the next meeting in April.
Barkindo also said he also used his trip to Houston to meet with U.S. shale producers, as he has done before. The secretary general said he is eager to learn more about how the U.S industry is able to find capital to expand drilling.
“This is not replicated in other places,” Barkindo said.
That access to financing has helped the U.S. industry raise production to about 12.1 million barrels a day, more than 1.4 million barrels a day above last year’s level. The increased U.S. output is an important factor helping the world meet its energy needs while Iran and Venezuela are under U.S. sanctions.
The OPEC producers and Russia are widely expected to extend their production cut of 1.2 million barrels a day for at least several months.
“The outcome of Baku will feed into the decision. It depends on the data. We must look at the data,” said Barkindo. OPEC meets again in June, and could take action at that meeting.
Analysts believe there is sufficient oil on the market now, and Saudi Arabia, which says it will produce 9.8 million barrels a day, could maintain that level of output.
Venezuela’s exports could fall below 1 million barrels a day this year and fall even lower under U.S. sanctions. Iran, also restricted by sanctions is expected to be exporting just about 1.1 million barrels a day.
Asked about Venezuela, Barkindo said OPEC is not a political organization and that Venezuela oil minister Manuel Quevedo has a ceremonial role as president of OPEC this year, a rotating position.
Barkindo said the oil market is in the process of rebalancing , which he described as “a work in progress.”
He said the OPEC and non OPEC monitoring committee meets this weekend, and OPEC is not expected to take any action at its upcoming April meeting.
Saudi Arabia Energy Minister Khalid Al Falih, who was not at the meeting this year, said over the weekend that OPEC and Russia would probably wait until a June meeting to consider output changes.
“We will see what happens by April, if there is any unforeseen disruption somewhere else, but barring this I think we will just be kicking the can forward,” Falih said. “We will see where the market is by June and adjust appropriately.”
Joining a chorus of industry executives, Barkindo said OPEC members are concerned about carbon and climate change.
He said most OPEC members rely on hydrocarbons but going forward they will seek to diversify their revenue base though oil would be the dominant source of revenue for the foreseeable future.
