OPEC members are discussing a potential extension of the oil production cuts through the end of 2020, an OPEC source told Russian news agency TASS
Talks are at early stages, but there is an understanding that
after March, the cuts should be extended until the end of the year, the OPEC
source told TASS on the sidelines of the World Economic Forum in Davos.
“Certainly, we can review any agreement at the meeting in June,”
TASS’s source at OPEC said.
According to the source, it is “unlikely” that the cartel decides
to relax the quotas in March, because the market is still very bearish in its
demand growth outlook.
At
the OPEC+ meeting in December, OPEC and its Russia-led partners decided to deepen the
oil production cuts by 500,000 bpd in the first quarter of 2020, when demand is
expected at its weakest for 2020. This brings total production reductions at
1.7 million bpd—that is if rogue members
fall in line with their quotas.
Considering
the pledge from OPEC’s largest producer and de facto leader Saudi Arabia that
it would continue to significantly overcomply with its share of the cuts, the
total OPEC+ cuts could be as high as 2.1
million bpd, OPEC said.
The
agreement in its current form expires at the end of March and OPEC and its
allies are set to meet early that month to decide how to proceed with the deal.
All
options are on the table for the next summit of the OPEC+ coalition, including further
cuts in oil production, Saudi Arabia’s Energy Minister, Prince
Abdulaziz bin Salman, said on Thursday.
OPEC
will have to address the oversupply in the market in the first half this year,
and the cartel is likely to extend the production cuts through the end of 2020,
Sushant Gupta, Research Director – Asia Pacific, Refining and oils market at
Wood Mackenzie, told CNBC earlier this week.