Opec nears output cut deal
The Organisation of the Petroleum Exporting Countries meets in Vienna tomorrow to consider whether to prolong the accord reached in December in which Opec and 11 non-members agreed to cut oil output by about 1.8 million barrels per day in the first half of 2017.
The market sees an extension by nine months as the base-case scenario since Opec’s de facto leader Saudi Arabia and top non-member Russia said they favoured such a move. Saudi ally Kuwait has signalled Opec could discuss deepening the cuts, in what would come as a positive surprise for market bulls, but hopes faded after a key committee recommended keeping the curbs unchanged.
Opec sources said a ministerial committee comprising Opec members Algeria, Kuwait, Venezuela, current Opec president Saudi Arabia and non-Opec producers Russia and Oman recommended keeping the cuts “at the same level”.
The committee said it had recommended extending the cuts by nine months to March 2018. Saudi Energy Minister Khalid al-Falih gave the thumbs up when asked whether the committee had agreed on a nine-month extension.
“Before the end of the year, prices may go above $55 a barrel,” Algerian Energy Minister Noureddine Boutarfa said before the committee meeting, saying an extension by nine months should help clear the glut by the year-end.
Saudi Arabia and Russia have said that extending output curbs by nine months rather than the initially planned six months would help speed up market rebalancing and prevent crude prices from sliding back below $50 per barrel.
“Opec has already achieved a lot. They stopped the oil market surplus from building even before they started cutting,” said Gary Ross, head of global oil at PIRA Energy, a unit of S&P Global Platts.
Most OPEC ministers, including Iraq’s, have already voiced support for extending cuts by nine months.
