Oil prices rose above $40 per barrel yesterday, continuing to gather support after the world’s biggest suppliers firmed up plans to meet to discuss an output freeze. Oil producers, including Gulf Organisation of the Petroleum Exporting Countries (OPEC) members, support talks holding next month on a deal to keep production at current levels. That is even if Iran declines to participate, OPEC sources said on Wednesday.
A meeting would increase the likelihood of the first global supply deal in 15 years. U.S. crude was up 65 cents at $39.11 a barrel, having earlier risen as high as $39.38. Brent crude rose 38 cents to $40.71. “A smaller than expected gain in inventories in the U.S. also supported prices,” ANZ said in a morning note. Crude inventories increased 1.3 million barrels in the week to March 11 to 523.2 million, a much smaller build than the 3.4 million-barrel increase expected by analysts.
The market is also rallying after a less hawkish U.S. monetary outlook, as the U.S. Federal Reserve held interest rates steady and indicated two rate hikes this year instead of the four expected. Qatari oil minister, Mohammed Bin Saleh Al- Sada, said producers from within and outside OPEC will meet in Doha on April 17 to discuss plans for a freeze in output.
The initiative was supported by around 15 OPEC and non-OPEC producers, accounting for about 73 per cent of global oil production, the minister said. Since the freeze was first proposed last month, prices have recovered about 50 per cent from decade-low level. Meanwhile, Nigeria’s Minister of State for Petroleum, Dr. Ibe Kachikwu, has advised oil-producing countries to use the fall in oil price to check cost profile in doing business. Kachikwu gave the advice at the closing ceremony of the 6th African Petroleum Congress and Exhibition, yesterday, in Abuja.
“The industry will still be in challenge in one to two years and I hope that the lesson you take away will help you either as government policymakers or practitioners in the industry, to confront some of the issues. “Amidst all these global chaos, reducing prices, lack of investments, loss of jobs, contracting of most of the servicing companies, postponement of major projects, there are some good safer linings.
“It is a good opportunity for countries to begin to look inwards, check their cost profile,” he said. According to him, during the era of $120 per barrel era, many countries and companies assumed that it would not end and the cost profile was up the bounds.
Kachikwu, who is also the Chairman of African Petroleum Producers Association (APPA), said that stakeholders were framing up the planned meeting of OPEC and non-OPEC countries. He said the meeting would hold on April 17, adding that it would help bring positive change in the industry.
“Hopefully, it will help to bring up the price higher than what it is today. Again, in the last two months, because of the work some of us have done, the prices are beginning to be firm. “We cannot know the predictions now, but there are signs of hope,” he said.
Kachikwu said that presently, countries were looking at the best ways to reposition their companies and countries. He advised African countries to emulate what countries in the Far East and the Gulf were doing right, especially in the area of governance and savings.
The minister added that a lot of intelligence was required, especially now that there was paucity of funds to unbundle challenges in the sector. Kachikwu noted that the coming together of African countries would help open up space for more investors in the sector in the region.