Kuwait: Kuwait and Saudi Arabia could reach an agreement by the end of this year to renew oil output in the shared neutral zone along their border, Kuwaiti Oil Minister Khalid Al Fadhel said.
The neutral zone, which has been shuttered for more than four years, can produce as much as 500,000 barrels a day. The zone’s Wafra and Khafji fields stopped pumping due to disputes between the two countries.
“We hope that by the end of the year things will be cleared out and things will go back to normal,” Al Fadhel told reporters in Kuwait City on the sidelines of a meeting of the Organisation of Arab Petroleum Exporting Countries. An actual resumption in output would depend on a political decision and a final agreement, he said on Sunday.
Saudi Oil Minister Prince Abdul Aziz Bin Salman will visit Kuwait on Tuesday to sign a deal on restoring production, the Kuwaiti Al Qabas newspaper reported, citing people familiar with the matter. It may take some time to resume output, the report said.
An agreement to start pumping again could weigh on crude prices amid concerns about sluggish growth in demand. However, even if production re-starts, the area wouldn’t add oil to global markets because both nations adhere to output limits under a commitment by the Organisation of Petroleum Exporting Countries, a person familiar with Saudi thinking said in October.
Oil inventories may grow by 700,000 barrels a day in the first quarter of 2020 even if Opec and its allies implement the entire cutback of 2.1 million barrels a day they agreed to earlier in December, according to the International Energy Agency. Supplies outside the group known as Opec+ group continue to grow much faster than world demand.
Benchmark Brent crude futures were trading at $65.92 a barrel on Monday at 9:16am in Dubai, compared with an intraday high for the year of $75.60 in April.
The disagreement between Saudi Arabia and Kuwait started over the Wafra field, which is operated by Chevron Corp. Saudi Arabia extended the original 60-year concession of the field, giving the US company rights over Wafra until 2039. Kuwait was furious over the announcement and claims Riyadh never consulted it about the extension.
Chevron, through its subsidiary Saudi Arabian Chevron Inc., remains committed to the neutral zone and is ensuring that production can resume whenever a decision is taken, said Sally Jones, a company spokeswoman.