OPEC members are discussing a potential extension of the oil production cuts through the end of 2020, an OPEC source told Russian news agency TASS on Friday.
Talks are at early stages, but there is an understanding that after March, the cuts should be extended until the end of the year, the OPEC source told TASS on the sidelines of the World Economic Forum in Davos.
“Certainly, we can review any agreement at the meeting in June,” TASS’s source at OPEC said.
According to the source, it is “unlikely” that the cartel decides to relax the quotas in March, because the market is still very bearish in its demand growth outlook.
At the OPEC+ meeting in December, OPEC and its Russia-led partners decided to deepen the oil production cuts by 500,000 bpd in the first quarter of 2020, when demand is expected at its weakest for 2020. This brings total production reductions at 1.7 million bpd—that is if rogue members fall in line with their quotas.
Considering the pledge from OPEC’s largest producer and de facto leader Saudi Arabia that it would continue to significantly overcomply with its share of the cuts, the total OPEC+ cuts could be as high as 2.1 million bpd, OPEC said.
The agreement in its current form expires at the end of March and OPEC and its allies are set to meet early that month to decide how to proceed with the deal.
All options are on the table for the next summit of the OPEC+ coalition, including further cuts in oil production, Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, said on Thursday.
OPEC will have to address the oversupply in the market in the first half this year, and the cartel is likely to extend the production cuts through the end of 2020, Sushant Gupta, Research Director – Asia Pacific, Refining and oils market at Wood Mackenzie, told CNBC earlier this week.
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