OPEC and its allies will discuss several proposals Thursday on their production cut accord, including one raised by Iraqi oil minister Thamir al-Ghadhban to deepen the output curbs by 400,000 b/d.
But how exactly to share out up any extra cuts and for how long would still need to be worked out, sources familiar with the deliberations told S&P Global Platts.
The sources said the additional cuts plus greater compliance by countries that have exceeded their production quotas, such as Iraq and Nigeria, could effectively take 700,000-800,000 b/d of crude off the market.
They added that rolling over the current 1.2 million b/d cut agreement, which expires at the end of March, is also one of the possibilities under consideration. However, one Gulf delegate said many countries were worried about how market fundamentals were shaping up in the first half of 2020.
An S&P Global Platts survey of OPEC production released Thursday found that the bloc had achieved 145% compliance with its cuts in November, with output coming in 368,000 b/d below the agreed quotas.
Ministers have been holding bilateral meetings throughout the morning to hash out their positions.
Saudi Arabia, OPEC’s largest producer and de facto leader, is set to begin trading shares of its state oil company Aramco next week and is keen to keep supporting oil prices, analysts say. It has consistently over-complied with its production quota under the deal to lead by example, but Prince Abdulaziz has said he wants more countries to share the burden.
Russia, the largest non-OPEC partner in the deal, has been more circumspect, with energy minister Alexander Novak suggesting that no decision on a cut extension needs to be made until closer to its end-March expiry. He has also said he plans to ask the coalition for Russia’s condensate production to be exempt from its quota, a potentially contentious issue.
In a statement after meeting with Prince Abdulaziz, Novak praised the bilateral ties between the two countries but made no mention of whether any consensus on production cuts had been forged.
“We highly appreciate the existing dialog, including at the highest level, between Russia and Saudi Arabia and are confident that we need to continue our cooperation both through international cooperation and in the direction of mutual development of energy and economic ties,” he said.
Nigerian oil minister Timipre Sylva confirmed that deeper cuts would be discussed and that his country would be willing to reduce its production further “if it is absolutely necessary.”
“It would be difficult for us, but if you don’t have any option, what are we going to do? We have to cut,” he said, just before he met with Saudi counterpart Prince Abdulaziz bin Salman.
Iranian oil minister Bijan Zanganeh, whose country is exempt from the cuts as its oil production is hampered by US sanctions, said that rolling over the current deal “is necessary but not enough,” echoing remarks made by Ghadhban on Tuesday in advocating for the deeper cuts. Zanganeh added that greater compliance by members with quotas was vital.
“We should try for those countries that didn’t comply to the current deal to conform,” he said.
THE OPEC MEETING SCHEDULE
Prince Abdulaziz and Novak will co-chair the OPEC/non-OPEC Joint Ministerial Monitoring Committee meeting that was scheduled to begin at 11:00 am local time (1000 GMT) but is running late to review market outlooks.
OPEC ministers will then gather at 3:00 pm (1400 GMT) to discuss their side of the deal. Non-OPEC ministers will join the talks Friday at 11:00 am (1000 GMT).
OMV CEO Rainer Seele told reporters that the market is waiting for a signal from the OPEC+ coalition on its outlook for 2020.
“There is the major question mark how OPEC is going to react to the trade conflict between US and China, [which] will really heavily impact global GDP growth next year,” he said. “The question is whether they should look into the crystal ball today or wait to see how 2020 will start.”
In a sign of how sensitive the negotiations are, the OPEC secretariat has canceled the traditional media scrums with ministers just before the OPEC meeting. Only opening speeches will be broadcast before the summit goes into a closed session.
Press conferences will be held at the conclusion of the OPEC meeting Thursday, tentatively 6 pm (1700 GMT) and after the OPEC+ meeting Friday, the secretariat said.
— Staff, email@example.com
— Edited by Jonathan Dart, firstname.lastname@example.org