OPEC (Organization of the Petroleum Exporting Countries) and non-OPEC ministers met for informal consultations in Vienna on Wednesday. The talks were a last-ditch bid to agree the duration of oil output cuts, as they seek to clear a global stock overhang that has pulled down the price of crude.
The top oil producer in OPEC, Saudi Arabia, favors extending the output curbs by nine months rather than the initially planned six months, to speed up market rebalancing and prevent crude prices from sliding back below 50 US dollars per barrel.
Khalid Bin Abdulaziz Al-Falih, Saudi Arabia's energy minister, center, arrives at the OPEC Secretariat ahead of the 172nd Organization of Petroleum Exporting Countries (OPEC) meeting in Vienna, Austria, on Wednesday, May 24, 2017. /VCG Photo
OPEC members Iraq and Algeria, as well as top non-OPEC producer Russia, also support a nine-month extension. But some Gulf OPEC members, including Kuwait and the United Arab Emirates, have pointed to a need for further analysis.
OPEC meets formally in Vienna on Thursday to consider whether to prolong the deal reached in December, in which OPEC and 11 non-members agreed to cut output by about 1.8 million barrels per day in the first half of 2017.
On Wednesday, a ministerial monitoring committee consisting of OPEC members Kuwait, Venezuela, Algeria and non-OPEC Russia and Oman met in the Austrian capital to discuss the progress of cuts and their impact on global oil supply. Saudi Arabia, which holds the current OPEC presidency, will also attend.
Several OPEC delegates said they expected the meetings on Wednesday and Thursday to be relatively painless, resulting in an output cut extension by nine months.
The logo of the Organization of the Petroleum Exporting Countries (OPEC) is pictured on the wall of the OPEC headquarters in Vienna on March 16, 2010. /VCG Photo
"I think the meeting will go smoothly," an OPEC delegate said, referring to signs of consensus in the group including Iran, which has fought Saudi Arabia in many recent OPEC meetings.
Several delegates and ministers said they did not believe cuts could be extended to a full year.
Possible surprises could include a deepening of the cuts, but this would likely be minor because the non-OPEC producers that are expected to join the accord for the first time on Thursday, such as Turkmenistan and Egypt, are fairly small.
OPEC's cuts have helped push oil back above 50 US dollars a barrel, giving a fiscal boost to producers.
But the price rise has spurred growth in the US shale industry, which is not participating in the output deal, thus slowing the market's rebalancing with global stocks still near record highs.
"This (stocks decline) is a bit tricky as production cuts cause higher prices which will incentivize more production for the US shale oil and reduce the impact of the production cuts. So it's a bit cyclical," said Sushant Gupta, research director for consultancy Wood Mackenzie.
(Source: Reuters)
