Just a week has passed since an OPEC official last aired the possibility of deeper cuts, and comments on steeper reductions are resurfacing from the cartel, just a day after oil prices hit a new low this year and the lowest in at least seven months.
OPEC producers are holding discussions on potentially deepening the cuts, although some cartel members believe that the current deal needs more time to take effect on the oil market, Iran’s Oil Minister Bijan Zanganeh said Wednesday, Platts reports, quoting Iranian state IRIB news agency.
“The US oil production increase was unpredictable and this increase is more than what OPEC members had foreseen,” according to the Iranian minister, who went on to add:
“We are in consultation with OPEC members to prepare ourselves for a new decision. But making a decision in this organization is very difficult because any decision will mean an output cut by the members.”
The Iranian minister personally believes that OPEC needs to “wait a while and see how the market will form.”
Iran’s oil ministry’s news service Shana quoted Zanganeh as saying on Wednesday that the “unexpected rise in US crude oil output has been the reason behind falling oil prices in the market.”
While OPEC’s no.3 producer Iran is not cutting production under the deal, but rather keeping it at 3.8 million bpd, its regional rival Saudi Arabia, OPEC’s de facto leader and biggest producer, is shouldering most of the cuts and compensating for rogue members, most notably OPEC’s no.2 Iraq.
In its latest Monthly Oil Market Report, OPEC said that “the rebalancing of the market is underway, but at a slower pace, given the changes in fundamentals since December, especially the shift in US supply from an expected contraction to positive growth.” Related: Have Natural Gas Prices Hit A Bottom?
Some analysts believe that OPEC needs to make deeper cuts, otherwise oil prices could slump further down to US$30 per barrel.
Earlier this month, Saudi Oil Minister Khalid al-Falih said that deeper cuts were not off the table, (nor on the table), and earlier this week he said that current expectations pointed to the market rebalancing in the Q4 2017 taking into account rising shale output.
WTI was trading up a modest 0.23 percent on the news at $43.61, while Brent was trading up .04 percent at $46.04 at 9:17am EST.
By Tsvetana Paraskova for Oilprice.com
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