…Summit likely to endorse output increase
20 June 2018, Sweetcrude, Lagos — The Organisation of the Petroleum Exporting Countries, OPEC, and its allies in the oil production cut deal, led by Russia, will meet in Vienna, Austria at the weekend.
The summit, holding on Friday, June 22 and Saturday, June 23, will decide whether the pact curbing output needed to be adjusted in order to rein in oil prices that topped $80 a barrel last month.
The oil production cut deal, also known as the Declaration of Cooperation, DoC, has been in effect since January 2017, helping to rebalance the market and shore up prices which went under $28 per barrel in 2016 – its lowest since 2003.
Brent and U.S. West Texas Intermediate, WTI, hit 3-1/2-year highs in May but have since drifted lower, indicating investors expect the market to soon become better supplied as U.S. crude production rises and as OPEC and its allies look poised to increase output.
Russian Energy Minister Alexander Novak said after talks with Saudi Energy Minister Khalid al-Falih in Moscow last week that both nations “in principle” supported the gradual exit from the output curb deal.
“We in general support this … but specifics we will discuss with the ministers in a week,” Novak said, adding that one option would involve gradually hiking output by 1.5 million barrels per day, possibly starting from July 1.
Saudi’s Falih did not offer specific guidance on what any deal in Vienna could look like. But he said: “We will see where we go, but I think we’ll come to an agreement that satisfies, most importantly, the market.”
“We’re going into an OPEC meeting where everyone is talking about raising production – the only question is by how much,” said Bob Yawger, director, energy at Mizuho in New York.
Greg McKenna, chief market strategist at futures brokerage AxiTrader, said Russia seemed to want a bigger rise in production than some other producers.
“My guess is the increase will be something less than the 1 million bpd (barrels per day) that the U.S. is supposed to have asked the Saudis for,” McKenna said.
Oil investors are nervous ahead of the Vienna meeting, and adding to investor jitters about supply, U.S. production has continued to ramp up.