Russian Energy Minister Finds Oil Market Shortage Next Month

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Russian Energy Minister Alexander Novak predicts a shortage in the oil market next month, Ifax said on Thursday.

Novak said world oil markets could see a deficit of between three and five million barrels a day in July, depending on the outcome of the OPEC meeting which may still be held this week.

The meeting which will help shape the future of the oil market in the coming months is however difficult, even if it seems that Saudi Arabia and Russia have reached an agreement in principle to extend the current level of cuts until the end of July.

The cuts are currently expected to ease from July.

But negotiations between cartel members are complex, Iraq, Angola, Nigeria and Kazakhstan overproductive – a bone of contention with more demanding members like Saudi Arabia.

OPEC + compliance reached 89% in May. OPEC’s second largest producer, Iraq, achieved only 42 percent compliance, according to preliminary data. While Saudi Arabia and Russia have agreed to extend the cuts at least for another month, they are not interested in doing so unless Iraq and the other overproducers align their production to the given quotas.

The OPEC + quotas provide for total reductions of 9.7 million bpd. Demand for oil, however, is still down 21 million barrels a day in May, according to Novak. But this represents an increase from 25 to 28 million b / d in April.

Novak added that the filling of oil storage has slowed and that thanks to current production reductions and improved demand figures so far, the market is expected to break even in June, before sinking into a deficit in July.

Based on May production, OPEC still has a million barrels to cut to fully comply with the current agreement.

By Julianne Geiger for Oilprice.com

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