Kuwait hopes to resolve Neutral Zone oil issue with Saudi Arabia by year end

KUWAIT (Reuters) - Kuwait's oil minister said on Sunday he hoped Kuwait and Saudi Arabia will resolve the Neutral Zone issue by the end of 2019.

The two countries halted output from the jointly-run oilfields - Khafji and Wafra - in the so-called Neutral Zone more than three years ago, cutting some 500,000 barrels per day of heavy crude or 0.5% of global oil supply.

Production cuts by the Organisation of the Petroleum Exporting Countries and rising demand from new refineries in Asia for heavy oil have supported Middle East crude prices.

"We hope that by the end of the year things will be cleared out and things will go back to normal," Kuwaiti minister Khaled al-Fadhel told reporters on the sidelines of a conference in Kuwait.

Two sources familiar with the matter told Reuters that the final agreement for the resumption of oil production from the Neutral Zone fields was expected to be signed on Tuesday in Kuwait City.

However, resuming oil production from the zone remains a political issue that needs to be discussed at higher levels.

In October, Kuwait's deputy foreign minister Khaled al-Jarallah said negotiations between Kuwait and Riyadh on the Neutral Zone issue were "very positive" and an agreement has been reached.

A source familiar with the Neutral Zone's oil operations told Reuters that restarting production from the joint fields, once a final agreement has been reached, would be done in phases and would take months for output to return to its full capacity.

(Reporting by Ahmed Haggagy in Kuwait, writing by Dahlia Nehme in Dubai; Editing by Alexandra Hudson and Himani Sarkar)