Kuwait could reach deal with Saudi to resume oil output in neutral-zone before year-end

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 Khaled Al-Fadhel said.

The neutral zone, which has been shuttered for at least 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 on Sunday on the sidelines of a meeting of the Organization of Arab Petroleum Exporting Countries in Kuwait City.

Kuwait visit

Saudi oil minister Prince Abdulaziz bin Salman will visit Kuwait on Tuesday to sign a deal on restoring output, the Kuwaiti Al-Qabas newspaper reported, citing sources familiar with the matter. It may take some time to resume production, the report said.

An agreement to start pumping again could weigh on crude prices amid concerns about sluggish growth in world demand. However, even if production resumes, the area wouldn’t add oil to global markets because both nations adhere to output limits that the Organization of Petroleum Exporting Countries has extended into early 2020, 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 ended trading in London on Friday at $66.14 a barrel compared with an intraday high for the year of $75.60 in April.

An actual resumption in production at Wafra and Khafji would depend on a political decision and a final agreement, Al-Fadhel said.

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.