OPEC and its oil-producer allies decided in December to trim daily crude output by 1.2 million barrels ()

Vienna (AFP) – OPEC and its oil-producing allies shifted Monday towards extending their daily output caps, sending oil prices racing higher before the outcome of the cartel’s  official gathering. 

Ministers from the 14-nation Organization of the Petroleum Exporting Countries (OPEC) met in Vienna to discuss output, before gathering a day later for OPEC+ — which is a grouping of 24 oil-producing countries that includes Russia and together accounts for almost half of global crude.

The enlarged crude producing club had already decided in December to remove 1.2 million barrels per day from the market to bolster prices and soak up excess supplies.

Russian President Vladimir Putin and Saudi Arabia agreed on Saturday to extend the deal by between six and nine months, but the move provoked consternation from some quarters.

The news nevertheless fired New York oil prices above $60 per barrel, with sentiment boosted also by the China-US trade truce agreed at the G20 in Osaka.

“Everyone supported the proposition to extend for nine months the limits agreed in December,” said Russian Energy Minister Alexander Novak ahead of the cartel’s main meeting.

Saudi Arabia’s energy minister Khalid al-Falih was meanwhile swift to deflect criticism from archfoe Iran that OPEC could “die” in the face of Riyadh and Moscow’s Osaka deal.

– Reports of OPEC death ‘greatly exaggerated’ –

Falih told reporters before OPEC’s main meeting: “I think OPEC is more vibrant than ever. As Mark Twain said once, the reports of OPEC’s death have been repeated many times, and every time it was … greatly exaggerated.

“We believe that oil as a commodity is unique. It’s the blood of the global economy. Ideally every producer should be around the table with us today.”

He added: “Saudi Arabia and Russia are the largest producers, we are delivering the largest cuts, we (…) agree first and then discuss our agreement with our colleagues from other countries.”

Iran had earlier slammed the Osaka move, arguing that OPEC did not simply exist to rubber-stamp a decision made outside of the cartel, but has however voiced its support for the extension.

The Islamic republic, with production severely hit by US sanctions, is however exempt from the December cuts agreement along with crisis-stricken pair Venezuela and Libya.

United Arab Emirates Energy Minister Suhail al-Mazrouei predicted that OPEC would agree to the plan amid the brighter post-G20 demand outlook. 

“We in the United Arab Emirates see that nine months would be more appropriate and we look forward to a healthier demand in the second half of the year after the good results from the G20 meeting,” Mazrouei said.

Kuwait’s Oil Minister Khaled Ali Al-Fadhel concurred, adding: “Because of the positive outcomes of the G20 … we are feeling more and more confident that things are looking better from now.”

OPEC and its oil-producer allies had decided in December to trim output after prices tanked at the end of last year on fears of slower global growth. In reaction the market soared by a third in the first quarter of 2019.

The cartel meanwhile remains on red alert over escalating US-Iran tensions that have also fuelled strong oil-price gains, particularly over disputed attacks on tankers in the Straits of Hormuz.

Yet global demand worries persist and the cartel has also lost market share to the United States, whose booming shale output has transformed it into the world’s biggest oil producer.

In afternoon deals on Monday, West Texas Intermediate crude stood at $59.60, up 1.9 percent, as some analysts cast doubt on whether the OPEC move would lift prices in the long run. 

“As such, the new deal will probably fail to address the rising non-OPEC supplies at a time the world economy is slowing, which could mean lower demand growth,” Forex.com analyst Fawad Razaqzada told AFP.

“Thus, the oil market is likely to be oversupplied again in due course, which means prices may struggle to push significantly higher from here,” he added.

Disclaimer: Validity of the above story is for 7 Days from original date of publishing. Source: AFP.