OPEC and partners discuss larger supply curbs - Report
Reuters reported that OPEC and its partners are discussing a proposal to cut oil output by 1.4 million barrels per day (bpd), three sources familiar with the issue said, although Russia may not be on board for such a large reduction. Worried by a drop in oil prices due to slowing demand and record supply from Saudi Arabia, Russia and the United States, the Organization of the Petroleum Exporting Countries is talking about a U-turn just months after increasing production. Such a shift could anger US President Mr Donald Trump, who urged OPEC on Monday not to cut supply. It also risks handing market share to the United States, while the sources said Russia might not be willing to back such a move.
A steep slide in prices has surprised many oil market participants. Brent crude has fallen from a four-year high of $86 a barrel in early October to USD 66 on Wednesday. Just weeks ago, some trading firms were talking of USD 100 oil. The sources, who declined to be identified by name as the talks are confidential, said a cut of 1.4 million bpd – equal to 1.4 percent of world demand – was one option discussed by energy ministers from Saudi Arabia, non-OPEC Russia and other nations in Abu Dhabi.
One of the sources said that “I believe a cut of 1.4 million bpd is more reasonable than above it or below it.”
OPEC and a group of non-OPEC nations, led by Russia, have been cooperating to limit oil supply since the start of 2017. They partially unwound their reduction in June after pressure from Trump to lower prices.
The OPEC-led deal got rid of a glut that built up in 2014 as supply from the United States and other countries outside the group soared. OPEC production rose too, after the then Saudi Oil Minister Ali al-Naimi blocked an OPEC curb on supplies to preserve market share.
This time, Saudi Energy Minister Khalid al-Falih has publicly spoken of a need to lower supplies by 1 million bpd, showing price support is trumping market share. OPEC meets on Dec. 6 to set policy for 2019.
A new round of OPEC-led supply cuts in 2019 would further support U.S. shale oil production, potentially repeating the cycle that played out in 2014. Oil prices rose on Wednesday, after Tuesday’s 6.6 percent drop, the largest one-day loss since July.
FIGURE YET TO BE AGREED
With three weeks to go until the Dec. 6 meeting in Vienna, OPEC and its partners have not settled on a final figure for a new supply cut, the sources said.
One of the three sources said a minimum cut of 1 million bpd was being considered and it could be larger than 1.4 million bpd. Another source, an OPEC delegate, agreed that a larger cut than 1.4 million bpd was possible, depending on the market.
Nigeria and Libya, which are exempt from the current supply limiting accord, could be included in a new agreement, two of the sources familiar with the matter said.
Source : Reuters