Saudi Arabia, the UAE and Iraq are all in favour of restraining production amid signs of faltering demand
OPEC is poised to extend oil-output cuts for the rest of the year when its members meet next month to assess supply and demand for crude.
Saudi Arabia, Iraq and the United Arab Emirates -- the group’s three biggest members -- all want to keep restraining production in a bid to buttress crude amid signs of faltering demand. Having resolved a month-long fracas over when to meet, the Organization of Petroleum Exporting Countries and its allies now look likely to roll over the cuts when they gather on July 1-2 in Vienna.
“I am not expecting a very difficult process in approving the extension,” United Arab Emirates Energy Minister Suhail Al Mazrouei told reporters on Wednesday in Abu Dhabi. Discussions at the July meeting will focus on the duration of the next agreement, he said.
Al Mazrouei’s remarks echoed views expressed over the weekend by Saudi Energy Minister Khalid Al-Falih and earlier in the month by Iraqi Oil Minister Thamir Ghadhban. Russia, the largest producer outside OPEC, remains a question mark as it has yet to clarify whether it will join in any cuts.
The producer coalition known as OPEC+ agreed earlier Wednesday to meet at the beginning of July. However, the group’s difficulty in picking a date highlighted political differences among its members and stoked turmoil in markets just weeks before their current production cuts expire. West Texas Intermediate for July delivery traded up 1.3 percent at $54.47 a barrel on the New York Mercantile Exchange as of 9:45 a.m. Thursday in Singapore.
The threat of conflict in the Gulf adds to market volatility. Tensions between Iran and the U.S. are escalating after attacks last week on oil tankers near the Strait of Hormuz. A rocket strike on Wednesday near an Exxon Mobil Corp. workers’ camp in Iraq had no effect on that nation’s oil fields or exports, according to a person with knowledge of the matter.
OPEC’s Economic Commission Board, which met this week in Vienna, sees global oil inventories contracting by almost 500,000 barrels a day if the group continues to curb supply in the second half, a delegate said. That means that while they’re planning to extend their agreement to trim output, countries like Saudi Arabia -- which are making deeper cuts than promised -- will still have scope to pump more without violating the deal.
“We are hoping that we will reach consensus to extend our agreement when we meet in two weeks time in Vienna,” Saudi Arabia’s Al-Falih told reporters on Sunday in Japan. The kingdom, OPEC’s biggest member, is seeking to balance global oil markets before 2020, he said.
Iraq, OPEC’s second-largest producer, sees the group and its allies extending production cuts “at least” on current terms without “serious difficulties,” Ghadhban said on June 7 in St. Petersburg.