Iran sees OPEC consensus for nine-month oil output cut extension

Ministers of the 13-nation cartel will likely decide to prolong them in an effort to support prices, when they meet Thursday.

On Monday, share prices took a dive, though, after the news that Iraq was resistant to longer extensions, but returned to pre-market levels when Saudi energy minister, Khalid al-Falih, flew to Iraq to gain its support for a nine-month extension.

He was head of the Russian Energy Ministry from 2001 to 2004, during Vladimir Putin's first Presidential term, and led the Russian delegation that negotiated his country's first ever participation in co-ordinated oil cuts with OPEC.

"We see the logic of an extension", Mr Al Mazrouei said in an interview on the sidelines of an EIC Connect conference in the capital for United Kingdom oil companies.

With the problem of shale output and the strategic petroleum reserve looming for next year, OPEC is in a hurry to hammer a deal now that reduces the glut.

However, this is where our "math", and Norland's skeptical assessment come into play: "Production cuts cause higher prices which will incentivize more production for the US shale oil and reduce the impact of the production cuts".

The world's two biggest producers of crude oil made the commitment last week to cut production by 1.8 million barrels a day for six months, but given the rebalancing effect the deal has had on oil prices, an extended production cut is expected to be agreed.

Oil prices settled a bit higher on Tuesday as expectations of an extension to OPEC-led supply cuts overshadowed a White House proposal to sell half of US petroleum reserves. If we are extending [the deal] you would think it would be at the same conditions as the previous six months.

One industry source close to OPEC said the group could also send a message about tighter exports but it was unclear how that could be presented on May 25.

In 2014, a global oil glut sent Brent crude tumbling from above $100 a barrel to around $50.

"Everybody I talked to is enthusiastic about joining" the oil output extension deal, Mr Al Falih said.

Crude oil prices were down more than 1 percent in overnight trading as investors mulled over a U.S. The production is up 877,000 barrels per day from its bottom in last July.

Saudi ally Kuwait signaled on May 24 OPEC could discuss deepening the cuts, in what would come as a positive surprise for market bulls, but hopes quickly faded after a key committee recommended keeping the curbs unchanged.

Gasoline stocks fell by 787,000 barrels, compared with analysts' expectations in a Reuters poll for a 1.2 million barrels drop.

Memorial Day weekend typically kicks off a period of high demand for fuel in the US, when drivers take to the roads for summer travel.

Benefiting from a market structure known as contango, in which future oil prices are higher than those for immediate delivery, US drillers have sold future production in order to finance expanding output.

  • Julie Sanders