Saudi Arabia, Iraq agree oil output cut needs 9-month extension
- Author: Zachary Reyes May 23, 2017,
May 23, 2017, 21:50
Saudi Energy Minister Khalid al-Falih said on Monday he did not expect any opposition within OPEC to extending oil output cuts for a further nine months, speaking after he met his Iraqi counterpart in Baghdad.
Oil prices initially fell 1 percent on Tuesday after U.S. President Donald Trump proposed to sell half of the United States' Strategic Petroleum Reserve (SPR) in the next 10 years as well as to speed up Alaskan exploration. Al-Luaibi had previously said that Iraq would support a six-month extension.
On May 19, Brent crude LCOc1 closed up $1.10, or 2.1%, at $53.61, the highest settlement for the worldwide benchmark since April 18. For now, the prospect of deeper as well as more extensive cuts is only a rumor, but it could turn into reality as OPEC is eager to demonstrate its willingness to do whatever it takes to prop up prices.
But OPEC's second-producer Iraq, whose output is growing fast, has said it will support extending output cuts in line with any OPEC decision but did not specify for how long Baghdad was willing to extend the current cut. "They [the Iranians] will be treated like everybody else", said the oil minister.
Oil prices swung from one-month highs to session lows in volatile trading on Monday as investors awaited a signal on output policy from OPEC's two biggest producers.
The initial deal failed to bring supply back within the limits of the five-year average, which is considered by OPEC to be a fair measure of oil's fundamentals. He stressed on the fact that while the security of supplies was important for consuming countries, the security of demand was equally important for producers.
OPEC, Pradhan said, should treat Asian markets as primary markets.
The Organization of the Petroleum Exporting Countries (OPEC) will meet in Vienna on May 25 to consider whether to extend curbs agreed in December previous year between OPEC and 11 nonmember countries, including Russian Federation.
OPEC meets Thursday to discuss its continuing, six-month deal to drop production by 1.8 million barrels, which leaders have said may get an extension through next winter.
Iraq's peers are tolerating its breaches mostly because Saudi Arabia has slashed 35 percent, or 171,000 barrels a day, more than it needs to, according to OPEC data. Turkmenistan along with Egypt and the Ivory Coast are due to attend the meeting, sources have said.