PREVIEW - OPEC, Oil Producers Meetings To Be Held In Vienna On December 5-6

MOSCOW (Pakistan Point News / Sputnik - 05th December, 2019) The 177th meeting of the Organization of the Petroleum Exporting Countries (OPEC) and the 17th meeting of the Joint Ministerial Monitoring Conference (JMMC), as well as the 7th Ministerial Meeting of OPEC and non-OPEC members, known collectively as OPEC+, will be held in Vienna on Thursday and Friday respectively.

The OPEC conference may discuss the accession of Brazil to the organization after Brazilian President Jair Bolsonaro said in late October that he would like his country to join OPEC. OPEC Secretary General Mohammad Barkindo said the organization would welcome Brazil as its new member and that this was long overdue.

The meeting of the JMMC, which assesses the oil output cut deal's implementation and provides recommendations to keep the market balanced, will focus on the future of the agreement, which is to expire in March 2020. In addition, the major goals of OPEC+, outlined in the charter that was signed in July, include strengthening the oil market's stability and the global economy, promoting dialogue between oil producers, oil consumers and relevant intergovernmental bodies, developing oil sector strategies and technologies, promoting oil usage as the key element of the developing global energy balance and improving oil's environmental reputation.

OPTIONS FOR OUTPUT CUT DEAL EXTENSION

OPEC+ countries have been reducing oil production since 2017 to counter oversupply on the global market caused by a recent boom in oil output in the United States. The OPEC+ oil output cut agreement has since been repeatedly extended, while its conditions keep changing. The agreement stipulates to cut supply by 1.2 million barrels per day from the October 2018 level for the first half of 2019. In July, OPEC+ extended the agreement on the same terms through March 2020.

OPEC's second largest oil producer Iraq prefers the deal to be extended at least until the end of 2020. According to Iraqi Oil Minister Thamir Ghadhban, there are three options for the extension of the deal. In particular, the extension until March, July or the end of 2020. He stressed that the final decision will be based on the consensus of all OPEC+ members.

Oman, a non-OPEC country, also favors extending the OPEC+ oil production cuts deal until the end of 2020, as the US presidential election, scheduled for November 2020, and future administration policies, including in trade issues, could create uncertainty for global oil demand. In September, Equatorial Guinea's Hydrocarbons Minister Gabriel Mbaga Obiang Lima told Sputnik that if US President Donald Trump loses the 2020 election, US oil production would begin to fall rapidly, which would force OPEC to increase production to contain prices.

However, Russia, a key non-OPEC producer, stated that the US presidential election should not be taken into account. According to Russian Energy Minister Alexander Novak, it is necessary to look at the overall trade and economic relations and at economic growth rather than political election procedures that exist all over the world. In addition, following the November reports on a possible extension of the deal until June next year, he stated that it was too early to talk about the deal extension as much could change in the market before the deal runs out in April. The Russian minister reminded reporters that all previous extensions to the 2017 deal had been agreed in the month before the expiry date.

Meanwhile, in late November, Lima said that a short extension of the deal remained possible as the parties had not reached a consensus on the issue so far.

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. While Iraq supported the proposal to increase oil output cuts by 400,000 barrels per day compared to the current level of 1.2 million barrels per day, some non-OPEC members, including Russia, reportedly opposed to the idea.

In addition, according to the recent media reports, Riyadh needs to maintain high oil prices to balance its budget. And Russia, the world's second biggest oil exporter after Saudi Arabia, also will benefit from a higher oil price. Therefore, the countries cooperate with OPEC on oil output cuts to prevent an oil glut that may be caused by increasing oil production by the US.

At the same time, there are still some sticking points for Russia regarding the deal. In particular, the question is how to measure oil outputs as Russia includes gas condensate in production figures, while other producers do not. In this context, media reported that Russia would probably escalate the condensate issue at the December meeting as its oil production continued to grow.