An oil production cut is expected when the Organization of the Petroleum Exporting Countries (OPEC) meets in Vienna next week amid worries over a U.S.-China trade war, a supply glut and demand slowdown, according to Johannes Benigni, chairman and founder of consultancy JBC Energy Group.
“OPEC will probably manage to stabilize the oil market by choosing the right language,” Benigni told CNBC’s Sri Jegarajah. “They will indicate a cut of between 1 million and 1.5 million, and that will do, the market probably will stabilize.”
Saudi Arabia raised oil production to an all-time high in November, Reuters reported on Monday, pumping 11.1 million to 11.3 million barrels per day (bpd) during the month.
The market is cautiously awaiting the outcome of the G-20 meeting when finance leaders meet in Buenos Aires on Nov. 30 and Dec. 1 to resolve a trade dispute between Washington and Beijing. OPEC leaders will gather in Vienna on Dec. 6 to discuss how to manage the oil output, supply glut and demand slowdown.
“What really are in oversupply are the light crude barrels which are coming out of the U.S.,” Benigni said. “So the expectation or the hope for OPEC right now would be that prices go lower, and demand may come back.”
Politics is adding to the pressure with U.S. President Donald Trump pushing for low oil prices with his tweets and urging OPEC to reject output cuts that will increase prices when the group meets with producers, including Russia, which is a non-OPEC member and the world’s second-largest crude oil producer and exporter.
“The question would be, is Russia ready to cut at $60?” Benigni said.
Oil prices clawed back on Monday, rising close to 3 percent, but concerns remained following news of Saudi Arabia adding to the glut in November. Prices had hit their lowest since October 2017 last Friday.
Brent crude oil futures rose 2.9 percent to close at $60.48 a barrel.
US West Texas Intermediate (WTI) crude rose 2.4 percent to close at $51.63 a barrel.