Iran sells crude oil at $45.21 per barrel in a week

"The bottom line for oil producers begins, unsurprisingly, with a dollar sign and ends in billions".

On May 15, Russian and Saudi energy ministers said in a joint statement that Moscow and Riyadh meant to propose a 9-month extension of the Vienna agreement on oil output cuts under the existing conditions.

"Despite a supply cut extension being factored in by the market, oil prices have made only modest progress".

OPEC and its allies believe they can continue earning more while pumping less.

That scenario has not been lost on Opec policymakers, who have been aware that it is a race to balance the market with their cuts before others can fill the gap, thus simply leaving them ceding market share. Ministers will gather in Vienna on Thursday to decide on a renewal of cuts at a time when Nigeria and Libya are restoring output, Iraq plans new production projects and USA drillers continue to add rigs. In fact the reserve has been cut in the past two and a bit years by a handful of sales, the most recent being earlier this year when a total of 16 million barrels were sold under authorisations from former President Obama.

OPEC's cuts have helped push oil back above $50 a barrel, giving a fiscal boost to producers.

"Charitably, one would argue that things have not quite worked out yet", said Jan Stuart, chief energy economist at Credit Suisse Group AG in NY. The markets have pretty much priced the extension in but whether all members are willing to play along for another 9 months is anything but certain and that is what investors will be focusing on.

Saudi Energy Minister Khalid al-Falih said he did not expect any opposition within the Organization of the Petroleum Exporting Countries to extending the curbs for a further nine months, speaking after he met his Iraqi counterpart in Baghdad.

"The most likely is the extension of the cuts for nine months".

Al-Falih said al-Abadi gave the green light for Iraq to approve the nine-month extension proposal in Thursday's meeting.

OPEC, led by Saudi Arabia, and other participating producers meet on May 25 and are expected to extend a pledge to cut output by 1.8 million barrels per day (bpd), possibly until March 2018. The supply reductions were initially meant to run for six months from January, but the slower-than-expected decline in surplus inventories prompted the group to consider an extension. The U.S. Department of Energy sold 6.4 million barrels in January and another 10 million in February.

80,000 barrels per day isn't much in the grand scheme of things (the petrostate cut plan reduced supply by roughly 1.2 million barrels per day), but it could get worse in the coming months as Iraq's capacity increases.

The US Congress created it in 1975 after the first Arab oil embargo caused fears of long-term spikes in motor fuel prices that would harm the US economy (really voters by making petrol expensive).

  • Zachary Reyes