OPEC And Russia Prepare For Long-Term Control Over Oil Market
In a tight oil market reacting with price gains to concerns about supply shortages, the leaders of the OPEC and non-OPEC nations part of the production cut deal—Saudi Arabia and Russia—hinted last week that easing the cuts was an option that they had discussed and that would be up for talks at the OPEC and allies’ meeting in less than a month.
Oil prices plunged from three-and-a-half-year highs on reports that the Saudis and Russia may add as much as 1 million bpd of supply to offset crumbling Venezuelan production and possible loss of Iranian oil exports with the return of the U.S. sanctions.
Many analysts don’t think the group would add the reported 1 million bpd of supply, but the oil market lapped up the news and concerns about a return to oversupply have dominated the OPEC chatter news flow for nearly a week. As the June 22 meeting is drawing closer, oil prices will likely react to any new hint, comment, or report about OPEC’s efforts to “address consumer anxiety over security of oil supplies.”
The latest of those reports says that OPEC and non-OPEC are set to stick to the production cuts through the end of 2018, but will be ready to “adjust” supply to address possible shortages.
The group of producers part of the pact “is not ready yet to fully lift controls,” a Gulf source familiar with the Saudi thinking has told Reuters, adding that “it is going to be a long-term cooperation for the sake of a stable oil market.”
“However, if any shortage takes place, the producers will coordinate closely and promptly take necessary actions. The OPEC and non-OPEC agreement will remain in place. But the level of the cut may be adjusted if a physical shortage arises,” the source told Reuters.
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