KUWAIT: Kuwait's Oil Minister Bakheet Al-Rashidi (left) and OPEC Secretary General Mohammad Barkindo attend a press conference yesterday. - KUNA

KUWAIT: The global oil market can absorb increased production resulting from the expected upturn of shale oil exports in the near future, Kuwait's Oil Minister Bakheet Al-Rashidi said in a press conference with OPEC Secretary General Mohammad Barkindo yesterday. A recent Reuters report suggested that the United States is set to increase its oil output to more than 10 million barrels per day this year as a result of surging oil production, and up to 11 million barrels a day by late 2019, a level that would rival Russia, the world's top producer. The report also said US energy exports now compete with Middle East oil for buyers in Asia.

But Rashidi believes that demand is still too high to suggest that more US exports could hurt OPEC members' share of the market. "We expect an increase in global demand in 2018 by 1.5-1.6 million barrels a day, which exceeds our expectations," he said. "Therefore, I believe that the increased demand can allow the market to absorb all production, either from conventional or unconventional sources such as shale oil."

Barkindo is visiting Kuwait to discuss preparations for the next Joint Ministerial Monitoring Committee (JMMC) meeting to be held in Muscat in March. "The meeting will focus on reviewing the technical committee for the agreement, in addition to reviewing the market situation," Rashidi said. And while indicating that prices will not be on the meeting's agenda, explaining that all members are committed to the agreement until the end of 2018, the minister noted that they have agreed to "review the situation by June".

OPEC and Non-OPEC members agreed during a meeting in Vienna in Dec 10, 2016 to limit oil output in reaction to a drop in oil prices at the time. In November, oil ministers from OPEC and non-OPEC member nations agreed to extend output cuts for the duration of 2018. The agreement has helped oil prices recover to nearly $70 per barrel today, but JMMC members say that their main focus is establishing stability in the market rather than setting a specific price rate for oil.

This policy helps protect the global oil market from being drastically affected by political factors; which affect prices more than they do production, Rashidi explained. "The market now is stable enough to accommodate any issues that do not have a major impact on supply and demand," he said. "Control of production will insure stability of the market more than any factor such as relations between countries."

A stable market also gives producers and consumers a clear mechanism to adopt their strategies and projects in the energy field, Rashidi said. "The goal of this agreement isn't to increase prices, but the stability of the oil market - which is a key objective for both producers and consumers," he noted.

Devising an exit strategy for the JMMC members in the future will not be discussed during Muscat's meeting, as they continue to show full commitment to the agreement going forward, according to Rashidi. "This is evident by the 106 percent total compliance rate showed by OPEC and non-OPEC members to the agreement in 2017," Rashidi said, noting that commitment reached 125 percent in December alone. "All indications point out that JMMC members are committed to the agreement, which targets stability of the market so that it would be protected from price fluctuations, while leaving prices to market factors such as supply and demand."

Asked how oil prices affect Kuwait's future projects, Rashidi said Kuwait has long-term projects that are not affected by price rates. "Kuwait's 2020 strategy targets increasing output to four million barrels a day, and those plans are still ongoing in light of the current prices," he indicated.

Separately, Barkindo said that the drop in the size of investments in oil industry over the last year threatens future supplies. Barkindo said in a statement to KUNA that the oil market that has been out of balance since the autumn of 2014 would gradually return to its equilibrium in 2018. Barkindo confirmed that 2018 will witness a balanced market that will bring back a reasonable price of oil which will be fair to both consumers and producers, as well as reenergizing investments in the industry.

Barkindo hailed the high level of commitment to this adjustment brought by last November's agreement to extend the deal, adding that there is no reason to doubt that the participating countries will continue with this level of commitment through 2018. He stressed that the OPEC agreement to cut production is not related to a specific price, but aims to achieve a number of objectives, the most important of which is to reach stability in the global oil market and withdraw surpluses. The OPEC chief praised the agreement for cementing long-term cooperation between the two groups to rebalance the markets in case of any disruption in the future.