Journalists and police officers outside the Opec headquarters in Vienna, Austria, December 5 2019. Picture: REUTERS/LEONHARD FOEGER
Journalists and police officers outside the Opec headquarters in Vienna, Austria, December 5 2019. Picture: REUTERS/LEONHARD FOEGER

Vienna — Opec and allies led by Russia agreed on Thursday to one of the deepest output cuts this decade to support crude prices and prevent a glut, but were still debating how long the curbs would last into 2020.

Opec is meeting to discuss supply policy in Vienna. Opec will then meet on Friday with Russia and other producers, a group known as Opec+.

Russian energy minister Alexander Novak said a panel of key energy ministers, including those of Saudi Arabia and Russia, recommended the Opec+ group deepen existing supply curbs of 1.2-million barrels per day (bpd) by another 500,000 bpd. The cut of 1.7-million bpd would amount to 1.7% of global supply.

He said cuts would last throughout the first quarter of 2020, a much shorter time frame than suggested by some Opec ministers, who have called for extending cuts until June or December 2020.

Business Day TV spoke to Bjarne Schieldrop from SEB about Opec's decision to cut oil output.

Opec could, in theory, decide to approve a longer time frame than Opec+.

“We concluded that to safely go through the seasonal demand period in the first quarter of 2020 it could be recommended that countries additionally cut up to 500,000 bpd,” Novak said.

Opec+ has agreed voluntary supply cuts since 2017 to counter booming output from the shale fields of the US, which has become the world’s biggest producer. Washington has forced an even steeper reduction in supply through sanctions on Opec members Iran and Venezuela aimed at choking both countries’ oil export revenue.

As producers meet on December 5 and 6, they will consider how to balance their supply with another year of rising output from the US in 2020. Other non-Opec countries, such as Brazil and Norway, are also expected to pump more oil.

Ministers from Saudi Arabia, Russia, Kuwait, the United Arab Emirates (UAE), Algeria, Oman and Algeria had their pre-Opec meeting on Thursday with the Opec meeting still not started as of 3.20pm GMT.

Saudi Arabia needs higher oil prices to support its budget revenue and the pending initial public offering (IPO) of state-owned oil giant Saudi Aramco with pricing of the IPO expected on Thursday.

Opec’s actions in the past have angered US President Donald Trump, but Trump has said little about Opec in recent months. That might change if oil and petrol prices rise ahead of the US presidential election set for November 2020.

Opec’s actions have supported oil prices at about $50-$75 a barrel over the past year. On Thursday, Brent crude futures extended this week’s gains to trade above $63 a barrel.

Opec sources have said Riyadh is pressing fellow members Iraq and Nigeria to improve their compliance with quotas, which could provide an additional reduction of up to 400,000 bpd.

Reuters

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