Oil prices continue rising with additional cuts in production expected

Oil continued to rise ahead of an annual meeting of Opec members and allies in Vienna as early indications point to a possible deepening of production cuts to tackle global oil inventories.

Brent, the most widely used crude benchmark, was up 0.46 per cent trading at $61.20 per barrel at 12.35pm UAE time, while West Texas Intermediate was up 0.61 per cent at $56.30 per barrel.

Oil exporters led by Saudi Arabia and Russia have been cutting 1.2 million barrels per day since the beginning of the year, with the agreement expected to hold until March 2020. During their meeting tomorrow at Opec’s headquarters in Vienna, the members, as well as producers outside the group including Russia, will review their compliance with the deal and explore the possibility of deepening cuts.

Iraq, Opec’s second-largest member, indicated that the alliance was considering a further deepening of cuts by 400,000 bpd, even though its own compliance has been patchy. Russia, the biggest producer within the alliance, has meanwhile said an extension of the agreement should be revisited towards the beginning of the second quarter of next year.

Saudi Arabia, the de facto leader of Opec, is looking at a deepening of cuts to the level suggested by the Iraqi oil minister, with plans to extend the pact until June, according to a report by Reuters. The world’s largest oil exporter wants higher prices, the report suggested, as it plans to list 1.5 per cent of the shares of state oil giant Saudi Aramco next week.

Opec+, as the alliance is known, is facing a challenging environment amid rising US shale oil production that threatens to undercut the prominence of the group in global oil markets. The US is the world’s largest oil producer with the country becoming a net exporter for the first time in 70 years last month.

The end of a crude oil export ban in 2015, as well as efficiencies accrued during the price slump in 2014-16, propelled the US to increase production from its shale basins, with the country set to reach 13 million bpd in output by the end of the year.

The US milestone comes amid slowing demand for crude globally, particularly from China. The Chinese economy grew at 6 per cent this year, one of the slowest rates in nearly three decades as Beijing’s trade war with the US continued to dent economic performance.