OPEC oil ministers gather to discuss production increase

The logo of the Organization of the Petroleoum Exporting Countries (OPEC) is seen at OPEC’s headquarters in Vienna, Austria June 19, 2018. (Reuters)
Updated 19 June 2018
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OPEC oil ministers gather to discuss production increase

  • Analysts expect the group to discuss an increase in production of about 1 million barrels a day
  • The officials were arriving in Vienna ahead of the official meeting Friday

VIENNA: The oil ministers of the OPEC cartel were gathering Tuesday to discuss this week whether to increase production of crude and help limit a rise in global energy prices.
The officials were arriving in Vienna ahead of the official meeting Friday, when they will also confer with Russia, a non-OPEC country that since late 2016 has cooperated with the cartel to limit production.
Analysts expect the group to discuss an increase in production of about 1 million barrels a day, ending the output cut agreed on in 2016.
The cut has since then pushed up the price of crude oil by about 50 percent. The US benchmark in May hit its highest level in three and half years, at $72.35 a barrel.
Upon arriving, the energy minister of the United Arab Emirates, Suhail Al Mazrouei, said: “It’s going to be hopefully a good meeting. We look forward to having this gathering with OPEC and non-OPEC.”
The 14 countries in the Organization of the Petroleum Exporting Countries make more money with higher prices, but are mindful of the fact that more expensive crude can encourage a shift to renewable resources and hurt demand.
“Consumers as well as businesses will be hoping that this week’s OPEC meeting succeeds in keeping a lid on prices, and in so doing calling a halt to a period which has seen a steady rise in fuel costs,” said Michael Hewson, chief market analyst at CMC Markets UK
The rise in the cost of oil has been a key factor in driving up consumer price inflation in major economies like the US and Europe in recent months.
Already US President Donald Trump has called on OPEC to cut production, tweeting in April and again this month that “OPEC is at it again” by allowing oil prices to rise.
Within OPEC, an increase in output will not affect all countries equally. While Saudi Arabia, the cartel’s biggest producer, is seen to be open to a rise in production, other countries cannot afford to do so. Those include Iran and Venezuela, whose industries are stymied either by international sanctions or domestic turmoil. Iran is a fierce regional rival to Saudi Arabia, meaning the OPEC deal could also influence the geopolitics in the Middle East.


Oil slips even as OPEC mulls cut

Updated 4 min 43 sec ago
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Oil slips even as OPEC mulls cut

NEW YORK: Oil futures fell about 1 percent on Monday amid global oversupply worries, but losses were muted as investors eyed potential sanctions on Iran from the EU, a possible production cut from OPEC and slightly bullish storage drawdown in US crude stocks.
Brent crude was down 70 cents a barrel at $66.06 at 4:37 p.m. GMT, having recovered from a session low at $65.27. US crude futures traded 15 cents lower at $56.31 a barrel.
EU foreign ministers endorsed a French government decision to sanction Iranian nationals accused of a bomb plot in France, potentially allowing the measures to take effect across the bloc, three diplomats said.
Potential sanctions from the EU would come as the US has granted waivers to some of Iran’s oil customers, muting the policy’s expected impact on global supplies.
The Organization of the Petroleum Exporting Countries, OPEC, led by Saudi Arabia, is pushing for the group and its partners to reduce output by 1 million to 1.4 million barrels per day to prevent a build-up of unused fuel.
Russian Energy Minister Alexander Novak said that Russia, which is not an OPEC member, planned to sign a partnership agreement with the group, and that details would be discussed at OPEC’s Dec. 6 meeting in Vienna.
“For a cut to be successful in supporting the market, they’re going to have to present a front that is not fractured and the chance of that is looking less and less likely as Dec. 6 approaches,” said Bob Yawger, director of energy futures at Mizuho in New York.
While a large cut would be supportive of crude futures, clear signals from producers are needed to lift prices notably, Yawger said. “We lack any certainty other than that the market is oversupplied in the US and everybody else is trying to deal with it.”
US crude stockpiles have grown for eight straight weeks, and data last week showed inventories swelled by the most in more than a year, weighing on the market.
Traders said futures pared losses on bullish stockpile data Monday as they said that energy information provider Genscape reported that crude inventories fell in the week ended Friday.
Brent is almost 25 percent below early October’s 2018 peak of $86.74, as evidence of slowing demand has materialized and output from the US, Russia and Saudi Arabia hit historic highs.
“Oil prices rose (last week) on the hope that OPEC and partners will act to reverse bearish sentiment, but from a technical set-up, bear mode remains intact,” OANDA strategist Stephen Innes said.
A trade dispute between the US and China is one reason investors are a lot warier about the outlook for oil demand growth next year.
Fund managers cut their bullish exposure to crude futures and options to the lowest since around mid-2017 this month.
Weekly exchange data shows money managers hold a combined net long position equivalent to around 364 million barrels of US and Brent crude futures and options, down from over 800 million barrels two months ago.
“The main trend remains bearish as investors no longer believe in a risk of supply tightness for crude,” ActivTrades chief analyst Carlo Alberto De Casa said.