With crude oil prices nudging steadily higher, market expectations are for crude-pumping nations to prolong their deal to curb output at a meeting at OPEC headquarters in Vienna tomorrow.
However, markets could be disappointed, with Russia reportedly not yet fully on board about signing up to extending the agreement, due to expire on March 31, until the end of next year, experts said.
The deal by 24 producers reduced production by 1.8 million barrels per day, first struck a year ago, has already been extended once.
It has borne fruit, helping reduce a global glut that sent crude oil prices to less than US$30 a barrel early last year, a level which helped consumers, but blew a hole in producers’ finances.
Brent Crude is now nearing US$65 per barrel, while fellow benchmark West Texas Intermediate has been heading for US$60, with inventories approaching more normal levels.
The price has also been helped by growing optimism about the global economy and its effect on buoying oil demand, not least from China.
“We have accomplished what naysayers thought would be impossible,” OPEC secretary-general Mohammad Sanusi Barkindo said on Monday. “The current market conditions, the returning level of confidence and optimism in the industry are all evidence of the outcome of our joint efforts.”
However, for one of OPEC’s founder members things are far from rosy.
Venezuela, whose oil reserves are the world’s biggest, is a whisker away from an all-out debt default.
Just as the South American nation needs foreign currency more than ever, oil output is forecast to fall for a seventh successive year next year to the lowest level since 1989.
As a result, Venezuela is producing even less than it vowed to under the output agreement, further reducing the global glut and giving others extra breathing space.
Venezuela “is significantly below the target level and shows no sign of being able to turn that around in the near term or even over 2018,” Richard Mallinson of Energy Aspects said.
Members of the OPEC cartel and Russia have crafted the outline of an agreement to extend the curbs to the end of next year, according to Bloomberg News.
Saudi Arabia is thought to be particularly keen since higher crude oil prices would help boost the value of national oil company Saudi Arabian Oil Co, some of which it wants to sell next year.
However, OPEC and Russia are still hammering out crucial details, Bloomberg reported.
Russian oil companies are reported to be particularly reluctant.
In September, Russian Minister of Energy Alexander Novak suggested it was premature to discuss an extension, saying he wanted to wait until January for further data.
A further possible complication could be the dramatic deterioration of relations between regional rival Saudi Arabia and Iran, both of which are members of OPEC.
Saudi Arabian Crown Prince Mohammed bin Salman last week called Iran’s supreme leader “the new Hitler of the Middle East.”
Iran, following the lifting of sanctions under the 2015 nuclear deal, was allowed a moderate increase in oil production under the producers’ accord, but Mallinson said that, like in the past, such as during the Iran-Iraq war between 1980 and 1988, the rivals should still be able to work together at OPEC, albeit through gritted teeth.
“So that shouldn’t be too much of a concern for the oil market,” he said.
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