Will OPEC Extend Output Cuts Again?

Reuters

Oil trader's attentions will be firmly fixed on Vienna on Friday, Sept. 22, where OPEC members and Russian Federation are meeting to discuss whether or not to extend production cuts that have underpinned oil's rise to over $50 a barrel this year.

Last May, Opec and non-Opec members agreed to extend production cuts for a period of nine months until March, but stuck to production cuts of 1.8 million bpd agreed in November past year.

"Any agreement - especially an agreement aimed at balancing the market, supply and demand - has to end somewhere", Mr Novak said after the meeting.

Brent crude futures gained 8 cents to touch $56.51 a barrel, while the US West Texas Intermediate (WTI) crude futures climbed 12 cents reached $50.67, reported Reuters. Still, predictions of strong growth in U.S. shale production next year mean there are still concerns that the scheduled expiry of the agreement at the end of March could be premature. The current deal, which was extended earlier this year, runs to the end of March 2018. In particular, we continue to view that while the decision to cut production to normalize inventories was rational, this strategy should be followed by a gradual increase in production to capture increasing market share and revenues in 2018.

Crude oil prices inched higher Friday, preserving weekly gains as OPEC met in Vienna to discuss output cuts.

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The Minister of State for Petroleum Resources, Ibe Kachikwu, had said recently that the country's daily production capacity had expanded to an average of 1.8 million barrels per day since the sustained exemption.

Ministers from nations that together pump more than half the world's oil at times made conflicting statements about whether they would use their meeting on Friday to address perceived shortcomings in their agreement.

Global benchmark Brent crude futures, the benchmark for oil prices outside the US, rose 0.36% to $55.34 a barrel.

The agreement signed by 24 producing countries, was enacted last January 1 with the objective of withdrawing from the market nearly 1.8 million barrels per day of oil.

At this its 5th meeting, the JMMC welcomed the participation of Iraq, Libya and Nigeria, and the reaffirmation of their commitment to ensure the success of the Declaration of Cooperation. "The reality is the cap we agreed on is 1.8 million bpd and as long as we are producing below that, we are already in it". In fact, several ministers from OPEC and non-OPEC countries have said that compliance with the terms of the deal is improving.

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