OPEC, non-OPEC hold informal talks to nail new oil cuts
- Author: Zachary Reyes May 24, 2017,
May 24, 2017, 23:56
Saudi Arabia's energy minister Khalid Al-Falih stated on Sunday that extending the supply cuts by an additional of nine months until next March and appointing two small manufacturers to the deal should ease oil stocks to their five-year average, a key basis for OPEC to examine the success of the plan.
We believe after such a roller coaster ride, crude oil will go into hibernate ahead of May 25 meeting of Opec (Organisation of the Petroleum Exporting Countries) and non-Opec nations in Vienna, which is widely expected to extend a pact to curb oil output. He's nonetheless optimistic that global inventories will fall by year-end as members like Saudi Arabia pick up the slack for Iraq's transgressions.
A risk, though, emerges if Iraqi compliance worsens to such an extent that other countries in the 13-member group start cutting corners too, exacerbating a global surplus that has already erased much of the price gain that unfolded after the deal was struck in November.
U.S. President Donald Trump's proposal to sell half of the United States' strategic oil reserve surprised energy markets on Tuesday since it counters OPEC's efforts to control supply in order to boost prices.
Just this month the two architects and key players in last year's agreement, Saudi Arabia and Russian Federation, announced they would continue with the agreement, set to shortly expire, until March 2018 and indeed will accelerate cuts to reduce near record inventories.
Asked whether deeper cuts were being considered, Marzouq said: "No". WTI is now trading at $50.9 per barrel and Brent at $2.7 per barrel premium o WTI.
OPEC, Russia and other producers agreed a year ago to reduce output by 1.8 million barrel per day for six months starting from January 1. But the total, it said, "will be less than half the level of 2012, when prices were more than double current levels". Rising production from non-OPEC and some OPEC countries like Libya and Nigeria not included in the agreement is overwhelming cut backs made by Saudi Arabia, Russia and Middle East producers, all set against a backdrop of lacklustre demand growth as vehicle economy improves mitigating the "benefit" of rising auto sales to demand. And U.S. producers are poised to expand more.
The White House proposal would also open areas of Alaska's arctic region to exploration.
Iraq's peers are tolerating its breaches mostly because Saudi Arabia cut 35 percent, or 171,000 barrels a day, more than it needs to, according to OPEC data.