Opec and its partners are unlikely to decide on their output policy in April as it would be too early to get a clear picture of the impact of their supply cuts on the market by then, three Opec sources said yesterday. The sources said the production policy by the so-called Opec+ alliance is expected to be agreed on in June with an extension of the pact the likely scenario so far, but much depends on the extent of US sanctions on both Opec members Iran and Venezuela. “So far the likely decision is to extend the agreement in June. Nothing much is planned for April, just to discuss the Opec and non-Opec (cooperation pact),” one Opec source said.
Opec and its allies meet next in Vienna on April 17-18 and delegates say another gathering is scheduled for June 25-26. Another Opec source said the most likely outcome of the June meeting was “a rollover” of the current oil supply cuts. “But production by the exempt countries is already more than 700,000 bpd below the October level. Maybe there will be some adjustment,” the second source said. On January 1, the Organisation of the Petroleum Exporting Countries and its allies began new production cuts to avoid a supply glut that could soften prices.
Opec, Russia and other non-members — the Opec+ alliance — agreed to reduce supply by 1.2mn barrel per day for six months. Opec’s share is 800,000 bpd, to be delivered by 11 members — all except Iran, Libya and Venezuela, which are exempt from cuts. The baseline for the reduction was in most cases their output in October 2018. As of February, Opec had fully delivered the 800,000 bpd cut compared to October, according to a Reuters survey. Another 900,000 bpd of involuntary declines in the exempt producers since October boosted the total Opec curb to 1.70mn bpd. The United States has imposed sanctions on state oil firm PDVSA in January, slowing exports.
Output in the country, once a top three Opec producer, has already been in decline for years due to economic collapse. Venezuelan oil minister Manuel Quevedo, who was included in the US sanctions list, currently holds the Opec presidency. Opec sources say that Quevedo will continue in his post as the exporting group’s president. Iran is also subject to US sanctions. The sanctions have roughly halved Iran’s oil exports. But in November, Washington granted waivers to some buyers of Iranian crude allowing them to continue their imports as long as they cut the purchases significantly. The US is set to decide whether it will renew waivers to oil-consuming countries on May 4. “Opec is now watching whether things are going to be more severe with Venezuela or Iran,” the first Opec source said.“That is our concern now.”\
Sources and photo-credits: Reuters, Gulf Times