In the Astana Expo 2017 that was recently held in Kazakhstan, Russia’s energy minister Alexander Novak took the liberty of stating that the global oil market is likely to reach an impasse, with the supply-demand imbalance in the first quarter of 2018. As per reliable sources, he even added that the oil supply of late, has been exceeding the demand, leading to the global inventory witnessing a plunge. However, to ensure proper market balance, he said, it is required that these inventories settle down to the five-year average target as set by OPEC. These output cuts are extremely essential, and Novak is confident that this balance is sure to come to effect in the next few quarters.

Russia, being a major crude oil producer, is one of the 24 countries that forms the OPEC (Organization of the Petroleum Exporting Countries). It is also committed to contribute all it can that will help balance the market. Crude oil producer countries under OPEC had agreed to cut down the output by 1.8 million bpd (barrels per day) to lift the oil prices by the first half of next year. However, as per sources, for the month of June, the global inventory remains high, dragging crude back to USD 50 a barrel, thus laying pressure on OPEC to extend the cuts for the rest of the year.

Novak further revealed that the agreement is working out despite the discrepancies, and global crude inventories are gradually collapsing. Thus, by reducing stockpiles, the demand is then projected to recover by next year’s first quarter.

The OPEC countries and other crude producers are expected to have a discussion and prolong the deal to second half of 2018 or even further. In addition, the agreement has gained renewed spotlight after the announcement of Arab nations cutting ties with Qatar came into the global picture.

Speaking along the same lines, the UAE, Saudi Arabia, Yemen, Egypt, Libya, Maldives, and Bahrain are the seven countries that have severed ties with Qatar, accusing it of backing terrorism. However, Qatar has countered these claims to be fabricated diplomatic rift.

Novak has stated that he hopes these conflicts in the Middle East to be resolved via political means and expects the countries to reconcile. However, this industry will continue to remain under pressure as the U.S. shale production is rising even after the OPEC deal. Reportedly, United States drill pipe market is all set to witness a major upswing with a substantial increase in the number of drilling rigs in U.S. The number has apparently risen by 741, as the shale producers continue to increase the number of shale exploration activities.