Journalists interview oil Ministers on the sidelines of the 176th meeting of the Organization of the Petroleum Exporting Countries (OPEC) conference and the 6th meeting of the OPEC and non-OPEC countries on July 1, 2019 in Vienna, Austria.
JOE KLAMAR | AFP | Getty Images
Global oil-producing group OPEC and its allies are meeting in Vienna from Thursday, with expectations raised over whether the alliance will make further cuts to its output at the two-day gathering.
The 14 members of OPEC and a group of allied non-OPEC producers led by Russia (collectively known as OPEC+) are expected to at least keep production cuts at their current level of 1.2 million barrels per day (bpd) through to June 2020.
The agreement is currently due to expire in March but there’s speculation that the group could even opt to cut further if Russia agrees. OPEC meets on Thursday and the group will be joined by its non-OPEC allies on Friday — with a final decision likely that afternoon.
Oil prices rose around 4% Wednesday off the back of Iraq’s suggestion for deeper cuts and there is a chance the production group will ultimately agree to cut more.
Iraqi Oil Minister Thamir Al-Ghadbhan endorsed a deeper cut, telling CNBC on Wednesday that the current cut of 1.2 million bpd “is not really that effective.” He said a 1.6 million bpd cut would be more effective.
Oil prices had pared gains overnight with a barrel of Brent crude for February delivery trading at $62.81 per barrel Thursday morning, while U.S. West Texas Intermediate (WTI) was priced at $58.16 per barrel.
Despite Iraq endorsing a further production cut, the second-largest oil producer in OPEC has failed to comply with the current cuts as they stand and is over-producing, according to secondary sources cited in OPEC’s monthly production report. In October, Iraq produced 4.6 million barrels per day; its meant to not exceed a level of around 4.5 million bpd.
The OPEC+ group (amounting to 24 countries) has cut its collective production since January 2017 in a bid to counter increasing global oil supply from the likes of U.S. shale oil producers and lackluster demand.
OPEC+ was prompted to act after global oil prices tumbled in mid-2014 due to an oversupply but U.S. shale producers are not a part of the deal and shale oil supply has grown exponentially. The U.S. is now the world’s largest oil producer hitting 12.3 million bpd in 2019, according to the U.S. Energy Information Administration, up from 11 million bpd in 2018. It produces more oil than Saudi Arabia and Russia now, although there are signs that production growth is slowing in the States.
Along with rampant shale supply, faltering demand due to a global economic slowdown, exacerbated by the Sino-U.S. trade war, has once again threatened to unbalance oil supply and demand dynamics.
