Published: Wed, May 24, 2017
Money | By Armando Alvarado

OPEC set to extend oil production cuts by 9 months


Speaking on Bloomberg television, Dicker credited Saudi Arabia for being "totally transparent" in their business dealings and OPEC members "for having all the discipline" in following through with their promised cutbacks; he also condemned the USA for "maniacally" undercutting the success of the cutbacks with steadily rising production.

On Thursday - May 25th - ministers from OPEC member countries will meet in the morning ahead of an afternoon gathering that will include non-OPEC oil exporters. The current level of production is just 305,000 barrels shy of the all-time high reached back in June 2015.

One of the most active banks in commodities trading, Goldman Sachs, stated that a nine-month extension could help rebalance the market and increase crude oil prices to $57 bpd.

But that price factors in the market's expectations of what will emerge from this week's discussion.

The decline came against a trend established last week when Russian Federation and Saudi Arabia called for extending a multilateral agreement to balance the market with managed production declines into early 2018, instead of year-end 2017.

"I doubt Iraq will cut any more in the second half than it has already", said Robin Mills, the Dubai-based chief executive officer of consultant Qamar Energy. OPEC, Pradhan said, should treat Asian markets as primary markets. It contains 687.7 million barrels of oil in salt caverns and tanks at designated locations in Texas and Louisiana, which allow for quick distribution when natural disasters or unplanned incidents occur.

Petroleum Minister Dharmendra Pradhan on Monday raised the issue of premium being charged on oil supplied to Asian countries by some OPEC members and asked that a reasonable pricing policy be adopted by the 13-nation producers' cartel.

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Goldman said that in order to control prices, OPEC and Russian Federation should extend or increase the cuts until stocks have normalised, express the goal of growing future production, and gradually ramp up output to grow market share but keep stocks stable and backwardation in place.

Investors should also note that OPEC's effect on prices is ultimately determined by its members' willingness to abide by its decisions, and they should pay attention in the long run to see if the petroleum exporting countries stick to their obligations.

"Both proposals are on the table at the moment, six and nine months".

The extension is the latest attempt by oil producers to prop up prices and revive their economies. US production has already jumped 500,000 bpd to 9.3 million since Saudi Arabia started to discuss the cuts in late-2016.

If OPEC maintains its April crude production of 31.8 MMbpd throughout the rest of the year, oil stockpiles will shrink, according to the IEA.

A release of USA strategic reserves could jolt an already imbalanced oil market and undermine attempts by The Organisation of the Petroleum Exporting Countries (Opec) and other producers, including Russian Federation, to end a persistent glut. Also, it has given propositions that the cuts could even be deepened.

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