Petroliam Nasional Bhd, Malaysia’s state oil company, said an extension of Opec production cuts beyond the originally planned six months would provide more stability to crude prices.
With the second half of the year looking uncertain for oil, the outcome of the group’s gathering in May will have a “lot of bearing” on prices, chief executive officer Wan Zulkiflee Wan Ariffin, said in an interview. Members of Opec, which doesn’t include Malaysia, agreed in November to cut production for the first time in eight years in an effort to shrink a global inventory glut and revive crude since its slide began in 2014.
“The continuation of this arrangement will give more stability in terms of prices going forward,” Wan Zulkiflee, 56, said Friday in Kuala Lumpur. “But, I think we are agile enough to take on any uncertainty.” Brent crude wasn’t able to sustain its rally above $55 a barrel following the Opec deal and a second accord in December with non-member countries, including Malaysia. Rising US production and by the stubborn overhang of about 285mn barrels of oil in storage have deflated prices.
The Petronas chief is adding to growing calls among producers for an extension of the supply reduction agreement, which the Organisation of Petroleum Exporting Countries will decide on when it meets May 25 in Vienna. Six group members, as well as Oman, have voiced support for extending the cuts past June, with Saudi Arabia and Kuwait saying oil stockpiles need to fall back to the five-year average.
Petronas said it would adjust Malaysia’s crude oil production by up to 20,000 barrels a day as part of the original deal. The country’s participation was agreed to by its government, and the company is ready to meet its commitments if the deal is extend, Wan Zulkiflee said. Opec’s Secretary-General Mohammad Barkindo said on Sunday that inventories are starting to decline, signalling that the deal is bringing the market to balance. Brent, the global benchmark, was up 1.2% to $53.44 a barrel yesterday as of 10:13 am Singapore time.
Petronas is budgeting oil prices at $45 a barrel this year, and it doesn’t rule out US producers ramping up production, according to Wan Zulkiflee. “The US producers are very agile, in terms of innovation and availability of funds” to increase output, he said. Petronas signed a deal in February with Saudi Arabian Oil Co for the Middle Eastern crude export giant to invest $7bn in an oil refining project in Malaysia’s southern Johor state. The two companies plan to develop and operate the plant in Pengerang as part of a larger integrated oil and petrochemicals complex. The Malaysian company swung to a profit in the October-December quarter on higher oil prices and lower impairment charges.