The deal to extend the cuts that saved the markets from self-destruction has been threatened by the errant behavior of some OPEC+ members.
That’s according to Rystad Energy’s Senior Oil Markets Analyst Paola Rodriguez Masiu, who outlined that Saudi and Russia are pushing for laggards such as Iraq and Nigeria to cut deeper in the months ahead to make up for past non-compliance.
“This is a déjà vu of a few months earlier when the OPEC+ alliance broke over Saudi Arabia making conditional its engagement to Russian participation,” Masiu said in a statement sent to Rigzone.
“It is unlikely that Iraq and Nigeria, both struggling with a crippling economy will give up to the Kingdom and the Kremlin demands to hike their quotas. No wonder why the market is trembling,” Masiu added.
Brent prices reached the $40 mark because of market enthusiasm that June’s production cuts would be continued by OPEC+ in July and August, Masiu noted. As an early meeting did not get confirmed and hopes did not, so far, materialize, prices naturally deflate now, according to Masiu.
“Speculation is the price mover this week, not that many changes in fundamentals. You can expect prices to now stay below $40, unless new rumors surface or an actual meeting is scheduled,” Masiu stated.
According to OPEC’s website, the 179th meeting of the OPEC conference will take place via video on June 9 and the 11th OPEC and non-OPEC ministerial meeting will take place via video on June 10.
On April 12, OPEC+ agreed to reduce its overall crude oil production by 9.7 million barrels per day (MMbpd) for two months from May 1, 7.7MMbpd for six months from July 1 and 5.8MMbpd for 16 months from January 1. The baseline for the calculation of the adjustments is the oil production of October 2018, except for Saudi Arabia and Russia, which both have the same baseline level of 11MMbpd.
To contact the author, email andreas.exarheas@rigzone.com
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