OPEC and its Russia-led partners in the production cut pact will discuss on Thursday whether the current state of the oil market warrants deeper cuts, Iraq's Oil Minister Thamer Ghadhban said on Wednesday.
The Joint Ministerial Monitoring Committee (JMMC) of the OPEC and non-OPEC countries that are part of the deal is meeting in Abu Dhabi on Thursday to take stock of the oil market and the OPEC+ coalition's efforts to erase the glut and prop up prices.
"That's why this meeting is going to be held tomorrow, to see should we continue with this cut or should we introduce a deeper cut," Ghadhban said in Abu Dhabi on Wednesday, as carried by Reuters.
OPEC and allies are currently taking a total of 1.2 million bpd off the market in a deal that they extended in July through March 2020.
The Iraqi minister told reporters that when the OPEC+ coalition discussed last November the cuts for this year, there were proposals for a cut of 1.6 million bpd and another for a 1.8-million-bpd cut.
"But there was resistance by some members and that's why we agreed on 1.2 million barrels per day," Ghadhban noted.
OPEC and its allies have managed to put a floor under oil prices, but they have so far failed to prop the price of oil to a level that would balance most of OPEC members' budgets. Trade tensions and fears of a global economic slowdown have made oil market participants pessimistic about global oil demand growth this year. Rising non-OPEC production, particularly from the United States, is also offsetting part of the OPEC+ coalition's cuts, and some analysts believe that deeper cuts may be necessary.
"Our oil supply-demand outlook for 2020 calls for additional OPEC production cuts to keep inventories near normal," Goldman Sachs said this week, as carried by Reuters.
"OPEC needs to cut, and they really need to cut in a big way to make sure that when next year is concerned, the oil prices do not fall off the cliff," Kelvin Tay of UBS Global Wealth Management told CNBC on Wednesday.
With market sentiment pessimistic about oil demand growth and with rising U.S. crude oil production, Saudi Arabia needs to take action sooner rather than later to support oil prices at least around US$60 a barrel Brent, IHS Markit said at the end of August.
Earlier in August, Emma Richards, senior industry analyst at Fitch Solutions, said that in the current gloomy market sentiment, OPEC would need to deepen the production cuts by 1 million bpd if the cartel wants to move up the price of oil.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More