Persian Gulf officials said that Saudi Arabia would be vouching for augmentation of oil supply cuts through to the end of June 2020 in a stakeholder meeting set to be held this Thursday and Friday.
As we approach this week’s OPEC+ meeting, the oil market has been stalling as players remain anxious about the outcome of the gathering. There have been international talks to boost compliance to agreed cuts. But talks about maintaining and possibly increasing the cuts that are expected deepen Saudi’s efforts are being overshadowed by the growing unrest among Middle Easterners.
Luckily, a decent section of OPEC+ players supports the deal to extend the production and supply cuts to mid-2020. If implemented, Saudi will be looking to ride on the deal to deliver a positive surprise to the market before the listing of Saudi Aramco, two sources familiar with the matter told CNBC.
The 5th and 6th members’ meeting that will bring together the Organization of the Petroleum Exporting Countries and other producers (OPEC+) is meant to make good on a resolution to add at least 400,000 barrels per day (BPD) to existing cuts of 1.2 million BPD. The current deal ends in March next year but a possible extension is likely to be reached from the meeting.
“They (the Saudis) want to surprise the market,” a source said.
A recent OPEC report drafted by OPEC’s Economic Commission Board (ECB) highlighted a high possibility of large inventory build-ups in the first half of next year, a situation that is likely to result in an oversupply unless further cuts are made.
Prince Abdulaziz bin Salman, who will also be attending his first OPEC meeting as the kingdom’s energy minister is expected to apply his tough negotiation skills to possibly strike a deal that will see Saudi Arabia’s most precious asset, oil, trade at high prices, especially during this period of Aramco’s IPO, a source told CNBC.
Prince Abdulaziz and other officials are calling on the body to institute stricter compliance measures to the cuts since countries like Nigeria and Iraq have been overproducing.