OPEC considers more production cuts on oil

Market Trends - 06/11/2019


OPEC and Russia are analyzing a variety of choices to
preserve the balance in the oil market before the critical December conference.
OPEC and its allies agreed late last year to lower the oil production by 1.2
million barrels per day to sustain prices. The deal will continue till March
2020, and the producers are expected to gather in Vienna to examine the terms
of the policy on December 5-6. Peter Lee, senior oil and gas analyst at Fitch
Solutions, said “The house view is that the meeting is likely to reaffirm the
group’s commitment to the cut that is already in place,” “The
current deal will remain in place until the end of Q1 (the first quarter) next
year, and we see scope for the deal to be extended until the end of next year,”
Lee added.





Experts believe that OPEC is expected to press other parts,
such as Iraq to enhance their yielding to support crude prices before the
Aramco initial public offering (IPO). Analysts at ANZ Bank stated yesterday “According
to delegates across the group, they will be pushing for better adherence to the
current production cut agreement”.





But the demand for broader production cuts is still possible.
 





Now a trade war resolution may establish a positive momentum
for oil prices and likely decrease the need for OPEC to actually act on the
matter.





Meanwhile, Aramco is now preparing to issue its IPO pricing
next month December 4 only one day before the Vienna meetings. Transparency on
the pricing may too affect the producer group’s judgments. founder of Vanda
Insights said “It makes sense for people to argue that because of the IPO and
other reasons, they will push for deeper cuts. I’m not buying into that
straight away”.


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