OPEC+ set to discuss short extension of oil production cuts

OPEC+ is set to discuss a short extension of its current output cuts, according to a delegate, as the cartel considers bringing forward its next meeting a few days to June 4.

The cartel and its allies are considering extending the current cuts for one to three months, the delegate said. As the situation in the oil market is moving fast, the preference is to take short-term measures and not disrupt the rebalancing of the market, the delegate said.

The existing deal – struck in April as energy demand and prices collapsed because of the coronavirus pandemic – calls for output curbs to ease from July. But that’s up for discussion at the next meeting. Russia wants to start easing from July, people familiar with the situation said last week.

Oil prices have rallied as the output cuts coincided with a stronger-than-expected rebound in demand. But with lockdowns easing across the globe, fears that the pandemic could have a second wave make predictions of a recovery perilous. At about $35 a barrel, prices are below what most producers need for government spending.

West Texas Intermediate crude and Brent, the global benchmark, edged lower in Asian trading on Monday as the protests in the US damped risk sentiment.

The date of the meeting, which will be held by video conference, was still to be confirmed late on Sunday, after people familiar with the situation said OPEC members were close to an agreement to bring it forward to June 4.

An earlier date would give the oil cartel more flexibility to change its current production limits. OPEC members usually decide their plans for shipping oil to customers for July in the first week of June, so an earlier meeting would give them more time to react.

Algerian Energy Minister Mohamed Arkab, who holds the rotating presidency, proposed June 4, instead of June 9-10.

The 23-nation OPEC+ coalition led by Saudi Arabia and Russia is undertaking record oil-production cuts to prop up prices. At the meeting it will decide whether to keep the existing agreement, or extend the current curbs.

The Organization of Petroleum Exporting Countries and its partners committed to lowering output by 9.7 million barrels a day, or about 10 per cent of global supply, in May and June.

In addition, Saudi Arabia, Kuwait and the United Arab Emirates made further voluntary cuts of about 1.2 million barrels a day for June, bringing the total OPEC+ curbs to almost 11 million barrels a day.

Production cuts are meant to be eased to about 7.7 million barrels a day in July.

Nigeria and the state oil company of Abu Dhabi, the UAE’s capital, have already announced plans to increase exports in July in line with the OPEC+ deal from April.

If the decision to move the meeting is confirmed, it would mean also shifting committee meetings that normally take place before a ministerial conference to later in the month.

OPEC has an Economic Commission Board meeting scheduled for June 2-3, and a Joint Technical Committee to assess implementation of the current supply cuts on June 5.