Extension of output cut deal likely in Vienna
US plan to sell part of its strategic reserves unlikely to impact oil markets
Organisation of Petroleum Exporting Countries (Opec) member countries are expected to extend the production cut deal beyond June when they meet in Vienna on Thursday, but the market will be looking at the extent of the cut even as additional supplies from the US strategic reserves threaten to disrupt the whole supply, demand equation.
Oil prices rose on Wednesday in anticipation of the extension of the deal with global benchmark Brent trading at $54.47 (Dh200) per barrel, up by 0.59 per cent and US crude West Texas Intermediate at $51.74 per barrel, up by 0.52 per cent at 1pm UAE time.
Thirteen members of Opec and 11 non-Opec members agreed to cut production by about 1.8 million barrels a day to prop up oil prices in December last year.
Opec agreed to slash output by 1.2 million barrels a day and non-Opec members led by Russia promised to cut 558,000 barrels a day.
“Some of the bigger producers have managed to achieve consensus about rolling over the production cuts and what’s really going to be up for debate is for how long that is going to be, whether it would be for six months or nine months,” Edward Bell, commodity analyst at Emirates NBD told Gulf News over phone.
He said Saudi Arabia, Kuwait and Algeria are pitching for a nine-month extension but Iraq is reluctant to support the deal for nine months although they are in favour of prolonging it beyond June. Russia is also endorsing a nine-month extension.
When asked whether the US plans to sell part of its strategic reserves would have any impact on oil markets and Opec production, he said it is just a proposal and needs to be debated in Congress.