Ministerial meetings between OPEC and non-OPEC allies has kicked-off in Vienna to discuss the next phase of their oil production policy. OPEC+ agreed last year to reduce volumes by about 1.2 million barrels a day. The current cuts expire in March 2020. The intrigue of the negotiations is that OPEC sources have said the new deal could be extended to June 2020, while Russia, the agreement leader, has not yet announced its position.
At a meeting held last week at the Ministry of Energy of Russia, it was proposed to postpone the deal extension until spring. Russian Energy Minister Alexander Novak earlier called for a change to the way its output is measured to exclude gas condensate, which accounts for about 7%-8% of Russia’s total oil production.
The outcomes of OPEC ministerial meetings on December 5-6 in Vienna are very important for market participants, as a decision if the group should roll over its production restraint agreement or consider deeper cuts after March 2020 will be worked out. It would help to assess the oil prices futures and oil demand outlook for 2020.
Iraqi Oil Minister, whose country suggested OPEC members to consider deeper oil cuts over the past six months, has proposed a further reduction of 6,000 barrels. Saudi Arabia is likely to push for a policy that would drive crude futures higher in order to help balance its budget and support pricing for the state producer Saudi Aramco.
Iran’s Minister of Petroleum, Bijan Namdar, who is now in Vienna, believes that the OPEC+ meeting participants will stand for extending oil cuts. According to Iranian media, he made a statement on Monday in an interview with Mehr.
“We have not discussed anything yet. Ministers are arriving today. Prior the meetings, nobody voiced their proposals,” Minister of Energy of the United Arab Emirates, Suhail Al Mazrouei, said to reporters, answering question whether the deeper oil production cuts under existing agreement will be considered.
His colleague, Saudi Energy Minister Prince Abdulaziz bin Salman has so far declined to comment on policy matters upon arrival in Vienna, while, he has made a joke by comparing the situation in the oil market with the sunny weather in Vienna.
The Organization of the Petroleum Exporting Countries (OPEC) is an intergovernmental organization of 14 oil-producing nations, headquartered in Vienna. The current OPEC members are the following: Algeria, Angola, Venezuela, Gabon, Iran, Iraq, Congo, Kuwait, Libya, the United Arab Emirates, Nigeria, Saudi Arabia, Equatorial Guinea and Ecuador. Secretary General (since August 1, 2016) – Mohammed Barkindo. The mission of the organization is to coordinate and unify the petroleum policies of its member countries and ensure the stabilization of oil markets.
OPEC member countries accounted for about 2/3 of the world’s oil reserves and for an estimated 35 percent of global oil production or for a half of world’s oil export.