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A ministerial committee of OPEC and its partners led by Russia recommended that the OPEC+ oil production cuts be deepened by 500,000 bpd, two sources told Reuters on the sidelines of the OPEC meeting in Vienna.
The Joint Ministerial Monitoring Committee (JMMC) of the OPEC and non-OPEC countries with representatives of the leaders of the two groups, Saudi Arabia and Russia, respectively, met to discuss the state of the oil market and to suggest a course of action for the full OPEC ministerial meeting which is taking place at the time of writing. The full ministerial OPEC plus Russia-led non-OPEC meeting will be held on Friday.
Russia’s Energy Minister Alexander Novak said at the end of the OPEC+ JMMC panel meeting that the recommendation is to deepen the cuts by 500,000 bpd in the first quarter of 2020 with full compliance and JMMC to meet again in March to review the market situation.
On Thursday, the much-anticipated meeting in Vienna began with rumors among analysts that a so-called “Saudi surprise”—deepening the cuts by 800,000 bpd or even more—may be in the making. The unusual level of ‘no comments’ from delegates and unusually cohesive discipline in (the lack of) messages to the media raises questions, Financial Times Energy Editor, David Sheppard, tweeted.
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Then word began to circulate that Saudi Arabia and Venezuela proposed at the OPEC+ panel deepening the cut by 500,000 bpd. A Saudi official told Energy Intelligence that there was “No deeper cut being advocated by the kingdom.”
There are also reports that Saudi Arabia told on Thursday its partners that it is no longer tolerating any cheating on quotas, and, according to Bloomberg, they are offering a quid pro quo—"we will cut, if you stop cheating.”
According to analysts who have run the numbers, deepening the cuts by 500,000 bpd—considering the October 2018 baseline in the current deal—would not be much of a hassle for the OPEC+ group, because they are currently overcomplying as a whole with the level of the cuts. If laggards in compliance, such as Iraq and Nigeria, fall in line, and if Russia wins with its request to have condensate out of the crude oil production numbers, then these additional 500,000 bpd ‘cuts’ are no actual cuts at all.
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.