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There isn’t any formal proposal at OPEC+ asking the group to consider a new round of oil production cuts, five sources at the producer alliance told Argus on Wednesday.
Such a proposal is not on the table right now, the sources said, but another source commented that new cuts could be made “if needed,” days after Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, said that OPEC+ is ready to cut production at any time in any form if it believes it would bring stability to the “schizophrenic” oil market.
OPEC+ may decide to launch another round of production cuts if Iran and the global powers reach an agreement to restore the so-called Iranian nuclear deal, which will eventually lift U.S. sanctions on Iran’s oil exports, two of Argus’ sources said.
Earlier this week, Saudi Arabia said OPEC+ stands ready to cut production if needed, Prince Abdulaziz bin Salman said in an interview with Bloomberg.
“Markets can’t reflect the realities of the physical fundamentals in a meaningful way and can give a false sense of security at times when spare capacity is severely limited and the risk of severe disruptions remains high,” Prince Abdulaziz bin Salman said, as carried by the Saudi Press Agency.
The Saudi minister said that the OPEC+ group would soon start working on a new agreement beyond 2022 and that it was “determined to make the new agreement more effective than before.”
Meanwhile, OPEC+ members are estimated to have produced 2.9 million barrels per day (bpd) below their collective oil production target in July.
Many OPEC+ producers struggle to pump to quotas due to a lack of investment and/or capacity. Kuwait is not one of those, according to its oil minister Mohammad al-Fares, who said that this month Kuwait had raised its output in line with its August target.
Only Saudi Arabia and the United Arab Emirates (UAE) are believed to have spare capacity left, with overall global spare capacity very low and quite vulnerable to a major supply-reduction shock in the near term.
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.