OPEC may be mulling over deeper oil production cuts, but they won’t be rushing to make that decision, even though a panel monitoring the cuts will be meeting next month, Reuters reported on Tuesday, citing OPEC delegates and sources familiar with the cartel’s thinking.
Russia is hosting a meeting of five oil ministers from countries supervising the production cut, plus Saudi Arabia in its capacity of OPEC president, on July 24. Although the officials could discuss options to prop up prices and draw down inventories, which may include levying production cuts on currently exempt Libya and Nigeria, OPEC sources do not believe that an outright deeper production cut will be considered soon.
“I doubt it will be considered soon,” one OPEC delegate told Reuters—a comment that leaves room for OPEC to exceed rather than just meet expectations, which was a problem the last go around when OPEC failed to meet the market expectations of cutting deeper.
“It is possible but there are no real discussions now,” according to a source familiar with the matter. The current deal’s downside is Libya and Nigeria being exempt from the cuts, the source told Reuters.
According to another OPEC delegate, the cartel may consider capping the crude production growth in Nigeria and Libya, rather than having them cut output.
Last week, Iran’s Oil Minister Bijan Zanganeh said that 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. Related: Oil Prices Inch Higher As Saudi Crude Oil Loadings Drop
On May 25, OPEC and non-OPEC producers part of the deal extended the supply-cut agreement into March 2018, but failed to excite the market, which has grown weary of OPEC talk, which promised to do “whatever it takes” to erase the glut. Fresh fears of rising supply from U.S. shale, as well as from OPEC’s own but exempt Nigeria and Libya, returned to the oil market, which last week hit its lowest in 10 months and ended a fifth consecutive week lower.
This week, oil prices started off on a higher note on Monday, and were also up on Tuesday for a fourth consecutive trading day, propped up by a weaker US dollar. At 9:08am EDT on Tuesday, WTI Crude was up 1.18 percent at US$43.89, while Brent Crude was trading up 1.35 percent at US$46.45.
By Tsvetana Paraskova for Oilprice.com
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