Opec is gearing up to deepen production cuts later this week but still needs to agree with allies such as Russia over details of a deal to support oil prices and head off a looming oil glut next year.
The Organisation of the Petroleum Exporting Countries (Opec) meets today in Vienna followed by a meeting with Russia and others, a grouping known as Opec+, tomorrow.
Opec+ has been curbing output since 2017 to counter oversupply as a result of booming output in the US, which has become the world’s biggest producer and is not taking part in cuts.
Next year, rising production in non-Opec countries such as Brazil and Norway threaten to add to the glut.
Opec’s actions in the past have angered US President Donald Trump, who has repeatedly demanded Opec’s leaders bring oil prices down.
In the past few months Trump has remained silent on Opec but he faces re-election in November next year when the issue of gasoline prices is likely to become a hot political topic again.
Washington’s ongoing trade dispute with China has also clouded the economic and therefore oil demand outlook for 2020.
Opec’s second largest oil producer Iraq said on Tuesday key members supported deepening cuts for Opec+ from the current level of 1.2mn barrels per day, or 1.2% of global demand. The current deal expires in March and two Opec sources have said it would be extended at least until June.
Oman’s oil minister Mohammed al-Rumhi said yesterday his delegation would recommend extending cuts until the end of 2020.
Saudi Arabia’s energy minister declined to comment on policy matters upon arrival in Vienna.
Opec’s actions have supported oil prices at around $50-$75 per barrel over the past year. Brent crude futures were up by around 2% near $62 per barrel early on Wednesday.
Iraqi Oil Minister Thamer Ghadhban said new cuts could be expanded to 1.6mn bpd, while Opec sources have also said pressing was mounting on fellow members Iraq and Nigeria to improve their compliance with quotas, which could provide an additional reduction of up to 400,000 bpd.
Not all Opec members were convinced of the need to cut deeper, however.
One Opec delegate said the move would boost prices and help spur a new phase of US oil output growth.
Non-Opec Russia has yet to agree to extend or deepen cuts from its current pledge of 228,000 bpd as its companies are arguing they are finding it tough to reduce output during winter months due to very low temperatures.
Russian Energy Minister Alexander Novak said on Tuesday that Moscow had yet to finalise its position: “Let’s wait...But I think the meeting, as usual, will be of a constructive nature.” A source familiar with the Russian thinking told Reuters that Moscow would “most likely” reach a consensus with Opec this week and just needed to iron out a few outstanding issues.
One sticking point for Russia this time is how its output is measured — it includes gas condensate in its figures, while other producers do not.
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