OPEC Considering Deeper Production Cuts

OPEC’s meetings appear to be in disarray even before they begin this week, but analysts see a growing chance the fractured group may ultimately agree to deeper production cuts, CNBC writes.

Members of the Organization of the Petroleum Exporting Countries meet Thursday in Vienna, and they will be joined by Russia and other non OPEC producers Friday. That larger group, known as OPEC plus, had been expected to extend an existing agreement to cut 1.2 million barrels a day through June. The agreement had been set to expire in March.

Helima Croft, RBC head of global commodities strategy, said it is now her understanding that a larger cut had the support of the OPEC core operating group, as well as its partner Russia.

Croft, speaking from Vienna, said it appears the defacto operating group of OPEC has agreed to larger cuts, but it was not discussed at a meeting on Tuesday of the Joint Technical Committee that monitors the production deal.

Iraq oil minister Thamer Ghadhban Wednesday told CNBC’s Dan Murphy in Vienna that the current cuts are not enough, and the group should cut 400,000 more. Croft said the Iraqi minister’s comments created a stir and helped send oil prices about 4% higher Wednesday, CNBC adds.

“If the plan was for a surprise party, it has been been dashed,” she said. “The problem with the Iraqi oil minister putting this information out there is now it has set market expectations. Now if they come out with just an extended cut, and not deeper, and just honor the rolling agreement to go to March, that’s a bearish outcome. He really did upend everything.”

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