Vienna: Organization of the Petroleum Exporting Countries (Opec) and non-Opec ministers meet for informal consultations in Vienna on Wednesday in a last-ditch bid to agree the duration of oil output cuts as they seek to clear a global stocks overhang that has pulled down the price of crude.
The top oil producer in Opec, Saudi Arabia, favours extending the output curbs by nine months rather than the initially planned six months, to speed up market rebalancing and prevent crude prices from sliding back below $50 per barrel.
Opec members Iraq and Algeria as well as top non-Opec producer Russia also support a nine-month extension but some Gulf Opec members including Kuwait and the United Arab Emirates have pointed to a need for further analysis.
The Organization of the Petroleum Exporting Countries meets formally in Vienna on Thursday to consider whether to prolong the deal reached in December in which Opec and 11 non-members agreed to cut output by about 1.8 million barrels per day in the first half of 2017.
On Wednesday, a ministerial monitoring committee consisting of Opec members Kuwait, Venezuela, Algeria and non-Opec Russia and Oman meets in the Austrian capital to discuss the progress of cuts and their impact on global oil supply. Saudi Arabia, which holds the current Opec presidency, will also attend.
Several Opec delegates said they expected the meetings on Wednesday and Thursday to be relatively painless, resulting in an output cut extension by nine months.
“I think the meeting will go smoothly," an Opec delegate said, referring to signs of consensus in the group including Iran, which has fought Saudi Arabia in many recent Opec meetings.
Several delegates and ministers said they did not believe cuts could be extended to a full year.
Possible surprises could include a deepening of the cuts, but this would likely be minor because the non-Opec producers that are expected to join the accord for the first time on Thursday, such as Turkmenistan and Egypt, are fairly small.
Opec’s cuts have helped push oil back above $50 a barrel, giving a fiscal boost to producers. By 0750 GMT on Wednesday, Brent crude was up 0.5% at around $54.50 a barrel.
But the price rise has spurred growth in the US shale industry, which is not participating in the output deal, thus slowing the market’s rebalancing with global stocks still near record highs.
“This (stocks decline) is a bit tricky as production cuts cause higher prices which will incentivize more production for the US shale oil and reduce the impact of the production cuts. So it’s a bit cyclical," said Sushant Gupta, research director for consultancy Wood Mackenzie. Reuters