Organisation of Petroleum Exporting Countries (OPEC) and its allies led by Russia on Thursday were moving closer to agreeing on one of the deepest output cuts this decade to support crude prices and prevent a glut, sources from OPEC say.
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The OPEC met on Thursday in Vienna and with Russia and others, a grouping known as OPEC+, on Friday.
Three OPEC+ sources said on Thursday the group would discuss increasing current cuts of 1.2 million barrels per day by more than 400,000 barrels per day (bpd).
The current cuts expire in March and OPEC+ sources and delegates have said the new deal could be extended to June or until the end of 2020. OPEC+ has curbed supply since 2017 to counter the booming output from the US, which has become the world’s biggest producer.
In 2020, rising production in the US and other non-OPEC countries such as Brazil and Norway threaten to add to the glut.
OPEC’s actions in the past have angered the US President Donald Trump, who has repeatedly demanded OPEC’s de facto leader Saudi Arabia brings oil prices down if it wants Washington’s to provide Riyadh with military support against arch-rival Iran.
In the past few months, Trump has said little about OPEC but that might change later in 2020 if oil and gasoline prices raise – a politically sensitive issue as he seeks re-election in November. Washington’s ongoing trade dispute with China has also clouded the economic and therefore oil demand outlook for 2020.
Iraq, OPEC’s second-largest producer, said on Tuesday OPEC de facto leader Saudi Arabia was supporting cuts of 1.6 million bpd, or 1.6 percent of global demand.
Saudi Energy Minister Abdulaziz bin Salman said he “feels good” about this week’s meetings but declined to comment on policy matters in Vienna.
Russian Energy Minister Alexander Novak told Abdulaziz on Thursday that Russia-Saudi energy cooperation should continue, his ministry reported.
Oil minister Bijan Zangeneh of Iran, which is exempt from the cuts, said he would support a deeper cut if that was agreed by other producers.
Brent crude futures were up 21 cents, or 0.33 per cent, to 63.21 per barrel at 1005 GMT. Brent surged 3.6 per cent on Wednesday. West Texas Intermediate (WTI) crude futures were up one cent to 58.44 dollars a barrel. They settled up 4.2 percent on Wednesday.
The OPEC+ group has been curbing output since 2017 to counter surging production from the United States, now the world’s biggest oil producer thanks to rapid growth in shale oil output.
By 2020, rising production in other non-OPEC countries such as Brazil and Norway threatens to add to the glut.
“We expect a constructive outcome for today’s meeting in terms of a prolongation of the deal, but are not yet convinced that a strong bullish surprise with a sizeable adjustment to the target level will really transpire,” Vienna-based consultancy JBC Energy said in a note.
OPEC’s effort to deepen cuts and increase member compliance was also driven by the group’s de facto leader Saudi Arabia’s hopes to see higher oil prices to support its budget and initial public offering of state-owned Saudi Aramco.
Oil prices surged on Wednesday on expectations of deeper OPEC cuts and data showing a large drop in US crude inventories last week. But prices are still roughly where they were a week ago, as concerns about a US-Chinese trade war persist.
US President Donald Trump on Wednesday described trade talks with China as going “very well”, a day after saying it could take until after next year’s presidential election to complete an agreement.
