OPEC could extend its crude oil production cut agreement by less than six months – the period that is widely assumed to be the logical continuation of the initial deal, which will be in force until June 30.
According to Sam Barden, director of commodity trader and advisor SBI Markets, as quoted by Trend, there is “no chance” of a six-month extension – OPEC producers need their oil production and their market share, which has suffered as a result of the initial agreement that, together with 11 non-OPEC producers, aimed to shave off 1.8 million barrels from global daily supplies.
Barden went on to suggest that Iran and Iraq will not partake in an extension, despite declarations from both countries’ oil ministers that they support the deal. Just this Saturday, Iran’s Oil Minister Bijan Zanganeh told media once again that Tehran will “support” the extension, but mentioned nothing of Iran taking part.
Russia’s Energy Minister Alexander Novak also proclaimed his support, adding that he will discuss the matter with OPEC a day before the cartel announces its final decision.
Zanganeh’s remark seems to be a general statement without a commitment on the part of Iran to join the price-boosting effort, but Iraq, for its part has clearly stated it will take part in an extension, as long as there is consensus in the cartel about its necessity. Iraq undertook to cut 210,000 bpd from its output between January and June and is now, according to Jabar al-Luaibi, at 97 percent of compliance. Related: Crude Drawdowns Can’t Save Oil Prices
The November 2016 agreement was widely expected to push international oil prices considerably higher, but after an initial boost, prices slowly slid down back to around US$50 per barrel.
The impact of the first round of cuts was blunted in part due to the ramp-up in production during the fourth quarter of 2016. Huge inventories were reported in the U.S. early in 2017, though there were declines in OECD inventories according to the IEA, evidence that the OPEC and non-OPEC cuts totaling 1.8 million bpd were having some effect, despite low compliance from non-OPEC states.
By Irina Slav for Oilprice.com
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