KUWAIT: Kuwait announced Friday it will export its first crude shipment from oilfields in a shared neutral zone with Saudi Arabia that had been shut for five years due to a dispute. Oil Minister Khaled Al-Fadhel said that around one million barrels will be loaded yesterday and today onboard a giant Kuwaiti tanker ‘Dar Salwa’, “whose final destination will be the Asian markets”, according to the official Kuwait News Agency (KUNA).
“The export of this shipment, produced from the shared Wafra field, is in line with the orientation of the state of Kuwait to increase crude production after the expiry of the OPEC+ agreement on March 31,” Fadhel added, referring to a previous agreement between oil exporters to curb global oil supply. KUNA also reported Kuwait will ramp up oil output in April until it reaches about 3.15 million barrels per day, citing the chief executive of Kuwait Petroleum Corp. The increase in output will come from the neutral zone.
Saudi Arabia and Kuwait signed an agreement in December to resume pumping at two major oilfields in the shared neutral zone that had been closed due to a disagreement between the neighbors. The two fields were pumping some 500,000 barrels per day before production was halted, first at Khafji in Oct 2014 and then at Wafra seven months later. Riyadh said at the time that the decision was due to environmental issues. The oil produced in the neutral zone in the border area is shared equally between the two nations.
The announcement comes as Saudi Arabia ramps up supply amid a price war with Russia that has sent oil prices crashing to 18-year lows as demand slides amid the coronavirus pandemic. Kuwait supports Saudi Arabia’s invitation for a meeting between OPEC and non-OPEC oil producers, an informal grouping known as OPEC+, to curb global oil supply and halt the oil price rout, Fadhel said. The energy ministry of non-OPEC producer Azerbaijan, meanwhile, said the OPEC+ meeting is planned for April 6 and will be held as a video conference, Russia’s RIA news agency reported.
OPEC and its allies are working on a deal for an unprecedented oil production cut equivalent to around 10 percent of worldwide supply in what they expect will be a global effort including the United States, but the White House did not make such a commitment after a Friday meeting with oil companies. While US President Donald Trump pledged help for the industry at the meeting, he made no commitment to take the extraordinary step of persuading US companies to cut output.
In a subsequent phone conference, US Energy Secretary Dan Brouillette told industry executives that the White House is not negotiating with Saudi Arabia or Russia, but it is encouraging them to come together to reach an agreement to cut production, a source who listened to the call said. The oil market has crashed, with prices falling to $34 a barrel from $65 at the beginning of the year, as a result of the coronavirus pandemic. Fuel demand has dropped by roughly a third, or 30 million barrels per day, as billions of people worldwide restrict their movements.
A global deal to reduce production by as much as 10 million to 15 million barrels per day would require participation from nations that do not exert state control over output, including the United States, now the world’s largest producer of crude. Trump said on Thursday he did not make any concessions to Saudi Arabia and Russia, such as agreeing to a US domestic production cut, a move forbidden by US antitrust laws. Some US officials have suggested US production was set for a steep decline anyway because of low prices.
OPEC producers are waiting to see if the United States commits to any efforts to stabilize the markets, two OPEC sources said. They said a deal must include producers from outside OPEC+, an alliance which includes OPEC members, Russia and other producers, but excludes oil nations such as the United States, Canada, Norway and Brazil. “The US needs to contribute from shale oil,” an OPEC source said. Russia has long expressed frustration that its joint cuts with OPEC were only lending support to higher-cost US shale producers.
Russian President Vladimir Putin said on Friday that his country was ready to cut production along with OPEC and the United States, while still blaming Saudi Arabia for the market’s collapse. Saudi Arabia’s Energy Minister Abdulaziz bin Salman responded, telling state media that it was not Saudi Arabia that refused to extend a production-cut deal that would have reined in output in early March.
Russian Energy Minister Alexander Novak told Russian state media that he understands the United States has legal restrictions on output cuts, but it should still be flexible. Brouillette, in his call with the industry, did not mention the possibility of US industry production cuts, the source who listened to the call said. Jason Kenney, the premier of Alberta, Canada’s primary oil-producing province, said on Friday that the province would join the Monday OPEC call.
The Norwegian oil and energy ministry declined to comment on Friday on whether Western Europe’s largest producer could cut output to support prices. The International Energy Agency warned on Friday that a cut of 10 million barrels per day would not be enough to counter the huge fall in oil demand. Even with such a cut, inventories would increase by 15 million barrels per day in the second quarter, said Fatih Birol, the head of the agency. – Agencies