March 19 (UPI) -- Russia is considering a wide range of scenarios on what to do with a multilateral effort to balance the global oil market, its energy minister said.
Russia is the largest contributor to an effort steered by the Organization of Petroleum Exporting Countries to balance an oversupplied market that's not a member of the production group. Energy Minister Alexander Novak told Bloomberg News the deal would stand as long as the five-year average of crude oil inventories held by the world's leading industrialized nations remained tilted toward a surplus.
"As soon as the ultimate goal of our deal is achieved -- which is the balancing of the market -- we will start considering gradual withdrawal," he was quoted as saying.
Crude oil prices started the year on a historic rally, moving from $66.65 per barrel for Brent, the global benchmark, to its highest close in four years, just above $70 per barrel, in a span of about a week and a half in January. That's in contrast to the sub-$30 range that occurred before OPEC's production cut agreement.
After Brent crude oil first closed above $70 per barrel this year, Novak said price wasn't driving compliance with the OPEC-led effort. The balance between supply and demand is the first metric to gauge, he said.
The deal, coordinated more than a year ago and implemented in January 2017, aims to drain the surplus on the five-year average in crude oil inventories by sidelining about 2 percent of global demand for oil.
In September, before an agreement was reached to extend the deal through the end of this year, Novak told Austria's Die Presse newspaper that a shorter extension may be preferred because of supply and demand dynamics.
"It's better to end the agreement during the growing demand period," he was quoted as saying. "It usually takes place in summer. When the demand will grow, everyone should gradually withdraw from the agreement."
Novak hedged his bets, however, telling Bloomberg that a discussion on how to unwind the deal could take place in June, while at the same time mentioning the possibility of an extension into 2019.
"We will act depending on the current situation," he said.
The International Energy Agency found the market surplus that dragged on oil prices two years ago has "all but disappeared." For demand, growth forecasts remain healthy over the next five years as the global economy picks up steam, but slows down from there.