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Published: Mon, November 07, 2016
Economy | By Melissa Porter

OPEC, Iraq Meet On Oil Supply Cut

OPEC, Iraq Meet On Oil Supply Cut

Russia, which postponed its domestic production-cut meeting to a week before OPEC's meeting, expects a quick recovery in US shale oil activity so that an output freeze could be short-lived, Interfax news agency reported.

The offer was made at a closed-door meeting in Riyadh, where the ministers met on Sunday.

And Iraq told a top OPEC official on Tuesday of its hope for a deal that would lift oil prices while preserving its own output level, an oil ministry spokesman said.

The Organization of the Petroleum Exporting Countries had agreed last month in Algiers to reduce their production of crude oil to a range of 32.50 million to 33 million barrels per day, OPEC's first output cut since 2008, in an effort to prop up prices.

Iraq, OPEC's second biggest oil producer, wants to be exempt from the cut, arguing it needs the revenues to fight Islamic State.

Baghdad's stance is likely to face opposition from other OPEC members, an OPEC source said on Friday.

"If there is a cut, then everyone must cut".

"Iraq and Iran are disputing OPEC's production numbers", Phil Flynn, analyst at Price Futures Group in Chicago, said of the cartel's baseline for setting output quotas.

Although it has not been officially communicated, there has been a basic general understanding that only conflict-torn Libya and Nigeria, as well as post-sanctions Iran, would be given leeway while others are left to cut production.

Oil, which moved up well over USA $50 in recent weeks has now fallen below that benchmark price and maybe headed even lower in the months to come.

OPEC nations have had a poor track record of following through on actually cutting production, he said. Taken together, more than a third of OPEC's production now stands outside the plan.

Wall Street rose on Friday as robust economic data shone light on the strength of the USA economy, while upbeat results from Alphabet and Chevron offset the decline in health stocks and Amazon. OPEC officials have said they need non-OPEC suppliers to cut production as well.

Industry sources say Aramco can not sustain such high output for long, as it sees 10.1-10.2 million bpd as a more comfortable level also for its oilfields and reservoir management.

However, other analysts were less optimistic about OPEC's ability to rally other members or Russian Federation.

Meanwhile, Chantico Global's CEO Gina Sanchez argued on CNBC's Street Signs Europe, that unless the market sees some significant news out of the OPEC meeting-which she said she didn't anticipate-oil is likely to trade back down to around United States dollars 40 per barrel. Distillate product supplied averaged about 4.1 million barrels a day over the past four weeks, up by 2.5% compared with the same period previous year.

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