Dec 5, 2019

OPEC's moment of decision on oil production cuts

Saudi Minister of Energy Prince Abdulaziz bin Salman al-Saud arrives for the 177th OPEC meeting in Vienna, Austria, on Dec. 5. Photo: Joe Klamar/AFP via Getty Images

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.

Go deeper:

Go deeper

OPEC+ to gather as challenges mount

OPEC Secretary General Mohammed Barkindo shakes hands with Russian President Vladimir Putin at the 2019 Russian Energy Week forum. Photo: Alexey Nikolsky/Sputnik/AFP via Getty Images

OPEC and Russia — among other allied producers — will gather in Vienna late this week to decide the future of their supply-limiting deal.

Why it matters: The OPEC+ group is struggling to prop up prices amid growing supplies from the U.S. and elsewhere, as well as rather soft demand and trade conflicts.

Go deeperArrowDec 2, 2019

OPEC and Russia near deal on deeper crude cuts, reports say

OPEC and allied producers — notably Russia — are coalescing around a plan to deepen their joint crude oil production restrictions by 500,000 barrels per day, according to multiple reports from Vienna, where the OPEC+ group is currently gathered.

Why it matters: The emerging agreement signals how petro-states are grappling with how to prop up prices amid rising supplies from the U.S. and elsewhere, and sluggish global demand that's hampered by trade battles.

Go deeperArrowDec 5, 2019

OPEC is still having a hard time exerting its sway amid U.S. oil boom

Saudi Minister of Energy Prince Abdulaziz bin Salman al-Saud on Dec. 5. Photo: Joe Klamar/AFP via Getty Images

A new International Energy Agency report underscores why oil markets haven't been hugely impressed with last week's OPEC+ decision to deepen their output curbs.

Driving the news: The agency's latest closely watched monthly report projects that global oil stockpiles could increase by 700,000 barrels per day in the first quarter of 2020.

Go deeperArrowDec 12, 2019