The members and non-members of OPEC that participated in the global agreement to reduce oil production in November will be meeting on May 25th – the day of the bloc’s planned summit in Vienna, sources in-the-know told Reuters.
All but two members of OPEC – Nigeria and Libya – participated in the output reduction, with Saudi Arabia taking the largest hit to its production. Eleven NOPEC nations, including Russia, agreed to cut 600,000 additional barrels daily, which hoped to take out of production a total of 1.8 million barrels per day for the first six months of 2017.
Now, the same countries are determining whether they should extend the provisions in the second half of 2017, but the fact that both OPEC and NOPEC are meeting on the same day suggests things may more quickly this time around.
“It all depends on Russia’s position,” an OPEC delegate told Reuters on Wednesday.
Moscow has not officially stated its support of a potential extension, though Oil Minister Alexander Novak said he had begun consulting Russian oil companies regarding the initiative.
Many OPEC member countries have expressed support at extending the cuts, which will expire in June. Kuwait, Iraq, Algeria and Angola have all stated that prolonging the production cuts is necessary to rebalance the markets. While global inventories have declined, according to the KLR Group, total inventory is still about 350 million barrels above the 2010-2014 average.
Saudi Arabia, the de facto leader of OPEC, is highly dependent on state-run oil giant Saudi Aramco for revenue, and 2.5 years of lower oil prices have created significant government budget deficits. Putting forth an Aramco IPO is seen as a way for the nation to raise revenue, replenishing cash reserves that were decimated during the downturn.
Russia has also seen deficits due to the bearish markets, suggesting the political and financial motivations for OPEC and its main rival are aligned as the parties get into further negotiations in Austria next month.(By Zainab Calcuttawala for Oilprice.com)