According to Reuters, Khalid al-Falih stated on Monday he did not expect any opposition within OPEC to extending oil output cuts for a further nine months. This announcement came after al-Falih met with his Iraqi counterpart in Baghdad.
Iraq has missed its target for output cuts by more than any other OPEC member, producing about 80 MBOPD more than agreed to. It is unclear if this announcement means Iraq will reduce its production to agreed-upon levels.
According to al-Falih, a new output deal would be similar to the one currently in place, with only minor changes. OPEC will decide one way or the other in the group’s meeting later this week.
Oil Market - May 23
Oil Market - May 23
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Market - May 23
https://www.reuters.com/article/us-opec ... SKBN18J1B4
All OPEC members seem to be onboard, even Iran. Minor adjustments for some countries may be made.
Other group of 11 countries, with Russia the largest, is also expected to extend their production limits. This group is only about 50% in compliance today.
All OPEC members seem to be onboard, even Iran. Minor adjustments for some countries may be made.
Other group of 11 countries, with Russia the largest, is also expected to extend their production limits. This group is only about 50% in compliance today.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Market - May 23
The oil traders are now expecting OPEC to announce a 9-month extension of their production limit of 32.5 million barrels per day (1.2 million BOPD of cuts). However, there is the possibility of a surprise. There is talk of a few more countries agreeing to cuts and the large producers may agree to cut another 200,0000 to 500,000 BOPD. IMO that would cause a price spike to over $55.
-------------------------------------
9-month extension with deeper cuts. [/b]"This scenario is the one to watch out for, as many analysts see the odds of much more aggressive cuts growing. An OPEC source recently told Reuters that the group was considering making deeper output reductions. "All options are open," the source said. Deeper cuts could come in several different forms. The collective output quota of 32.5 mb/d could be lowered, with country-specific limits tightened. This would be a heavy lift, but if agreed to, would lead to a much stronger price impact, immediately pushing up crude benchmarks substantially. Another way to make deeper cuts would be to remove the exemptions given to Libya and Nigeria. Both countries were not subject to any limits in the initial six-months, and both have added output and signaled more production growth in the near future. It is not clear that they would agree to limits, given their serious economic and security troubles.
OPEC has a tendency to surprise, so any of these outcomes – or others – are possible. Still, an extension of the existing cuts for nine months appears to be the most likely scenario. At the same time, OPEC has sort of backed itself into a corner – it has raised expectations to such a degree that anything less would be considered a major disappointment."
By Nick Cunningham of Oilprice.com
-------------------------------------
9-month extension with deeper cuts. [/b]"This scenario is the one to watch out for, as many analysts see the odds of much more aggressive cuts growing. An OPEC source recently told Reuters that the group was considering making deeper output reductions. "All options are open," the source said. Deeper cuts could come in several different forms. The collective output quota of 32.5 mb/d could be lowered, with country-specific limits tightened. This would be a heavy lift, but if agreed to, would lead to a much stronger price impact, immediately pushing up crude benchmarks substantially. Another way to make deeper cuts would be to remove the exemptions given to Libya and Nigeria. Both countries were not subject to any limits in the initial six-months, and both have added output and signaled more production growth in the near future. It is not clear that they would agree to limits, given their serious economic and security troubles.
OPEC has a tendency to surprise, so any of these outcomes – or others – are possible. Still, an extension of the existing cuts for nine months appears to be the most likely scenario. At the same time, OPEC has sort of backed itself into a corner – it has raised expectations to such a degree that anything less would be considered a major disappointment."
By Nick Cunningham of Oilprice.com
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group