OPEC set to prolong oil output cuts

Kuwait says producers to discuss 6-, 9-month extensions

VIENNA, May 23, (RTRS): OPEC will likely agree to extend production cuts for another nine months, delegates said on Tuesday as the oil producer group meets this week to debate how to tackle a global glut of crude.

OPEC’s de facto leader, Saudi Arabia, favours extending the output curbs by nine months rather than the initially planned six months, as it seeks to speed up market rebalancing and prevent oil prices from sliding back below $50 per barrel. On Monday, Saudi Energy Minister Khalid al-Falih won support from OPEC’s second-biggest and fastest-growing producer, Iraq, for a nine-month extension and said he expected no objections from anyone else.

The Organization of the Petroleum Exporting Countries meets in Vienna on Thursday to consider whether to prolong the deal reached in December in which OPEC and 11 non-members, including Russia, agreed to cut output by about 1.8 million barrels per day (bpd) in the first half of 2017.

The decision pushed prices back above $50 per barrel, giving a fiscal boost to major oil producers. But it also spurred growth in the US shale industry, which is not participating in the output deal, thus slowing the market’s rebalancing.

Saudi Arabia’s Gulf ally Kuwait said on Tuesday not every OPEC member was on board for an extension to March 2018, but most delegates in Vienna said they expected a fairly painless meeting on Thursday.

“The Saudi oil minister’s view seems accurate and no serious objection is expected if at all,” said one delegate, who asked not to be identified as he is not allowed to speak to the media.

A third source added: “I think it will be a smooth meeting to extend through until March 2018, and see what happens with US shale. It will grow but there are limits.”

Algerian Energy Minister Noureddine Boutarfa said on Tuesday that OPEC was discussing a possible nine-month extension, with curbs kept at the same level as under the group’s existing deal.

“Right now we are talking about nine months,” Boutarfa told reporters soon after arriving in Vienna.

Two OPEC sources said a one-year extension was also an option, though others said most discussions were centring on nine months due to weak seasonal demand in the first quarter.

Kuwait’s oil minister said on Tuesday that global oil producers would discuss at their meeting this week whether to extend output cuts for six months or nine months, because not all were on board for nine.

“We have agreed on the six months. Some of the countries have agreed to six months subject to a revision in November for an additional three months,” Essam al-Marzouq told reporters before heading to Vienna for the Thursday meeting.

“From what I have heard, some of the press releases, the Iraqi and Iranian ministers have declared that they prefer six months,” he said, before adding: “For nine months not everybody (is) on board.”