OPEC, allies set to agree oil cut extension to end of 2018
VIENNA (Reuters) – OPEC and non-OPEC oil producers look poised to agree at a meeting on Thursday to extend output cuts until the end of 2018, four OPEC sources said as the group seeks to clear a global glut of crude and avoid another price crash.
Some last-minute debate was still possible on the language of an expected statement, with non-OPEC Russia pushing for a clear message on how to exit the cuts so the market is prevented from overheating by flipping into a deficit too soon.
The producers’ current deal, under which they are cutting supply by about 1.8 million barrels per day (bpd) in an effort to boost oil prices, expires in March.
“They will agree on the nine months,” an OPEC delegate said, adding that a meeting of the Organization of the Petroleum Exporting Countries, due to start around 0900 GMT, was expected to be smooth.
A second source said: “No surprises … all are for nine months.”
Two other sources made similar remarks. The OPEC meeting will be followed by a gathering of OPEC and non-OPEC producers led by Russia at around 1400 GMT.
The 14-member OPEC and Russia have signalled that they may review any extension of the deal when they meet again in June if the market overheats.
With oil prices LCOc1 rising above $60 per barrel, Russia has expressed concerns that such an extension could prompt a spike in crude production in the United States, which is not participating in the deal.
Russia needs much lower oil prices to balance its budget than OPEC’s leader Saudi Arabia, which is preparing a stock market listing for national energy champion Aramco next year and would hence benefit from pricier crude.
“Prices will be well supported in December with a large global stock draw. The market could surprise to the upside with even $70 per barrel for Brent not out of the question if there is an unexpected interruption in supply,” said Gary Ross, a veteran OPEC watcher and founder of Pira consultancy.
Three sources familiar with OPEC talks said the group may also debate capping Nigerian and Libyan output at 1.8 million bpd and 1 million bpd respectively, having exempted the two countries so far due to unrest and lower-than-normal production.
The production cuts have been in place since the start of 2017 and helped halve an excess of global oil stocks although those remain at 140 million barrels above the five-year average, according to OPEC.
Russia has signalled it wants to understand better how producers will exit from the cuts as it needs to provide guidance to its private and state energy companies.
“It is important … to work out a strategy which we will follow from April 2018,” Russian Energy Minister Alexander Novak said on Wednesday.