OPEC and its allies led by Russia are weighing production cuts to halt a sharp slump in oil prices during meetings being held this weekend in Abu Dhabi. Ministers from Saudi Arabia and Russia will lead key monitoring committee meetings due to start in the UAE capital on Sunday with output policy high on the agenda.
Their deliberations are being complicated by surging US shale output and waivers granted to eight customers of Iranian oil, which have helped drive Brent crude below $70/b. “We are worried about the situation of the market, the global economy, the demand and supply,” one delegate said as he left an advisory committee meeting Saturday.
OPEC and 10 non-OPEC partners led by Russia have boosted production since agreeing in June to increase supplies by a combined 1 million b/d from May levels to offset expected losses by sanctions-hit Iran and economically strained Venezuela. However, weaker market conditions have put the need to restrain output back on the group’s agenda.
NYMEX WTI futures have declined for 10 straight days, equaling the index’s longest losing streak and closing Friday at a 2018 low of $60.19/b. OPEC sources have indicated that the monitoring committee may recommend that the production increase be reversed and cuts reinstated. “The market has changed a lot in a short period of time,” another delegate said.
OPEC production has risen 820,000 b/d since May, according to the latest S&P Global Platts OPEC survey of analysts, industry officials and shipping data. Meanwhile, Russia reported earlier this month that it hit an all-time high of 11.41 million b/d in October, up about 440,000 b/d from May.
This comes as the US Energy Information Administration estimated that US output also hit a record high of 11.4 million b/d in October. Analysts with PVM Associates said in a note Friday that the price slump appears likely to continue, unless OPEC and its partners agree to cut production.
“Barring a U-turn in OPEC/non-OPEC production strategy, nuggets of price support will be sporadic at best and will provide little in the way of upside potential,” they said. The monitoring committee meeting is scheduled to start at 5:00 pm local time (1300 GMT). The committee comprises ministers from Saudi Arabia, Russia, Kuwait, Venezuela, Algeria and Oman. UAE energy minister Suhail al-Mazrouei, who holds the rotating OPEC presidency this year, is hosting the meeting.
More News On Crude Oil
Oil Short-Sellers Make a Comeback as OPEC Moves to Center Stage. The oil bears are back, and they’re looking at OPEC before making their next move. While money managers slashed bets on rising West Texas Intermediate crude prices for a ninth week in their longest retreat on record, short-selling jumped to the highest in more than a year. The rapid shift in sentiment sets the stage for an OPEC meeting on Sunday to discuss market conditions.
Investors will be waiting to see whether OPEC provides any indication that the group will trim production once again next year as futures plunge. A change in policy would follow President Donald Trump’s calls on the cartel to lower oil prices and ramp up output to make up for lost crude from Iran due to U.S.-imposed sanctions.
Among the reasons for the bearishness that has roiled the oil market are OPEC production at the highest since 2016, record U.S. output and waivers given to a number of importers of Iranian crude, including China.