The six-member GCC countries, which include Saudi Arabia, have agreed to push for an extension of the oil output deal between Opec and 11 other countries when it expires at the end of June.
The energy ministers, meeting in Abu Dhabi for the GCC Media Forum, agreed that they will seek consensus among all 24 countries participating in the deal, and if that is reached they will back an extension, although possibly for a period of just three months rather than another six months, according to Essam Al Marzooq, Kuwait’s energy minister and the chief architect of the original deal, which commenced in January.
"Our decision [in the GCC] was to push for the deal if we see consensus among the others," Mr Al Marzooq said, referring to the 11 non-Opec countries, which include Russia and Oman.
Khalid Al Falih, the Saudi energy minister, earlier confirmed that the kingdom had given its backing to the preliminary deal.
Saudi Arabia has been bearing the biggest load of Opec’s pledged 1.2 million barrels per day of cuts, having agreed to trim 500,000 bpd to just above 10 million bpd, but in fact has been producing below that level in the January through March period to ensure a high level of compliance.
Mr Al Falih had previously been reluctant to commit to a deal extension because of worries that other producers would get a "free ride" from the kingdom’s efforts, while his country suffers economically from the cuts it has made.
The IMF last week downgraded its forecast for economic growth in the region’s oil-producing countries, cutting its real GDP growth forecast of the seven oil-exporting countries in the Middle East to 1.9 per cent this year, a full percentage point below its forecast before the deal was struck at the end of last year.
Saudi Arabia is expected to grow at 0.4 per cent versus a forecast for 2 per cent before the deal, the direct result of lower revenue from reduced oil exports.
Compliance from Russia, which has pledged to cut 300,000 bpd, the largest slice of the nearly 600,000 bpd from the non-Opec group as a whole, has fallen behind its pledge but it has improved, Mr Al Marzooq said.
"Compliance [by Russia] has risen from 120,000 bpd in the first month to almost 230,000 bpd right now and compliance from non-Opec from 40 per cent to 60 per cent and we are looking at above 80 per cent this month," he said.
Mohammed Al Rumhy, Oman’s energy minister, said he expected the entire non-Opec group to agree to an extension, noting that Russia and Iran have made preliminary pledges.
"We all joined – non-Opec joined with Opec – to solve a problem and in our opinion the problem is not fully solved," Mr Al Rumhy said. "So, I’m sure they will want to complete the job."
Oil prices are up about 20 per cent from last year’s average of US$45 per barrel for North Sea Brent, although they have not been able to push past the mid-to-high $50s because of worries that inventory levels remain stubbornly high.
But the UAE energy minister Suhail Al Mazrouei said there was too much concentration only on US inventory levels, which have stayed high because of a surge in shale output there, with total US production back above 9 million bpd from 8.4 million bpd last September.
Kuwait’s energy minister said despite the US output surge, the maths meant that inventories looked at globally would fall if their output deal holds – "I’m an engineer and I know one plus one equals two. We’ve cut by 1.8 million bpd, we are seeing a rise this year in demand of about 1.4 million bpd and an increase of 500,000 bpd from shale oil, that still leaves us in the proximity of a 2 million bpd shortage," he said.
Analysts broadly think that oil prices will rise further this year if the deal holds. Citibank and Goldman Sachs are among those expecting mid-$60s per barrel oil if that happens.
"Our global crude balance shows implied stock draws in July and August even in the event of a halt to the cuts," said Eugene Lindell, senior oil analyst at JCB Energy consultants in Vienna.
"Therefore an extension, even for three months, would give the market a bullish injection, likely propelling crude prices above $60 per barrel, albeit temporarily, as pressure should build as 2018 draws closer."