OPEC nations, Russian Federation look to cut oil output to lift prices

Goldman expects an'uneventful three-month OPEC output cut extension-oil and gas 360

Source Reuters

Looking into next year, markets will undoubtedly be focused on whether the Organization of the Petroleum Exporting Countries and allied producers (known as OPEC+) decide to extend cuts in oil production targets or not.

The cuts next year are in addition to OPEC's previous cut agreement of 1.2 million bpd and represent about 1.7% of global oil output.

Earlier this week, media reported that Saudi Arabia as a key OPEC member planned to increase oil cuts 400,000 barrels per day and insist on stricter compliance with the current cuts as some countries, including Iraq and Nigeria, produced well above their quotas, while Riyadh reduced more than demanded.

The Opec oil cartel is considering deeper cuts to production next year to avert a price slump in the market as the global economy falters.

That is something that the alliance has struggled to achieve throughout the three years of its existence, with some countries such as Iraq actually increasing output after promising to cut.

Secondary sources were designated OPEC and non-OPEC production reference sources, while some countries had stated prior to the 177th OPEC meeting that they would not accept secondary sources as such, and that it was preferable for each country to report their oil output.

OPEC'S move appeared to bolster investor confidence in the short-term, as oil prices continued to rise sharply on Friday.

Brent crude oil, the worldwide benchmark, dropped 0.2 percent to $63.28 per barrel while West Texas Intermediate crude oil was down 0.3 percent to $58.24.

The new targets will be in force for January, February and March 2020, when the OPEC+ group will hold a fresh high-level meeting to agree on further production targets.

Saudi Arabia's new production target was likely to be above 10.1 million barrels a day, according to one delegate, slightly higher than recent levels. "It is more of a compliance maneuver and an effort to distribute the Saudi over-compliance that has been in place since about April to other OPEC+ members". But they also do not want to lose global market share to the United States, which keeps pumping more oil. That doesn't require the group as a whole to pump less oil, since it was already implementing an additional cut of that size in October 2019. A sticking point in the talks had been how to split the cuts between producers.

"We have reached an agreement with all OPEC members", he said.

Russian Federation has indicated it wants its oil production re-calculated to exclude gas condensate, a liquid byproduct of natural gas production.

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