OPEC's moment of decision on oil production cuts
OPEC and Russia are deciding next steps in their three-year effort to restrict production in order to prop up prices, during their two-day meeting currently underway in Vienna.
Why it matters: It will reveal how Saudi Arabia and Russia, the OPEC+ group's dominant players, will continue grappling with soft global demand and the rise of U.S. shale production.
- On the latter point, the consultancy Rystad Energy is out with a note this morning that sees U.S. shale output continuing to grow a lot over the next three years even if WTI prices hang around in the $54–$57-per-barrel range. (They're $58-ish right now.)
The intrigue: There's genuine drama heading into this session.
- It's unclear whether they'll deepen the production cuts, or rollover the agreement that curtails production by 1.2 million barrels per day through March.
- The looming Saudi Aramco IPO is adding a new wrinkle into the meeting amid reporting that the Saudis want an outcome that will juice oil prices
- Share pricing will be announced any moment now ahead of trading slated to start this month on the kingdom's domestic exchange.
- Another thing to watch, per Bloomberg, is how the Saudis will pressure other members of the group to actually adhere to their pledges.
- "Saudi Arabia is offering fellow OPEC+ members a quid pro quo: If you stop cheating, we’ll curb production," Bloomberg reports.
Where it stands: Financial Times energy editor David Sheppard tweets from Vienna this morning that there's "growing chatter among analysts about a potential 'Saudi surprise'" — additional cuts of 800,000 barrels per day or more.
- But he cautions that delegates are tight-lipped. That said, a Rapidan Energy Group note yesterday similarly sees additional cuts as high as 1 million barrels per day.