Gulftimes : Russia sees constructive Opec+ meeting

WTI and Brent crude oil futures are extending their gains after the EIA reported a 4.9 million barrel draw down.

US West Texas Intermediate crude was up 25 cents, or 0.5 per cent, at $56.21 a barrel.

The global oil supply demand balance requires an extension of the current OPEC+ cuts given the large increase in output from non-OPEC projects and an uncertain demand growth outlook, the bank said.

Prices have fluctuated throughout the year, reaching almost $75 per barrel in April after US sanctions on Iran and Venezuela limited world supply, but lingering trade tensions between the USA and China dampened economic expectations, pushing prices back down.

The oil-producing nations will decide whether to stick with production cuts they've endured for the past three years, relax them or deepen them in the hopes of propping up prices.

OPEC oil output fell in November as Angolan production slipped due to maintenance and Saudi Arabia kept a lid on supply to support prices before the initial public offering of state-owned Saudi Aramco, a Reuters survey found.

"If they just keep the existing situation, there will be a massive oversupply", said Jacques Rousseau, managing director of Clearview Energy Partners.

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The target of Saudi ire are reportedly three specific nations, namely Iraq, Nigeria and Russian Federation; this emerged during a slide presentation by a Saudi official who said the trio of oil-producing nations weren't adhering to the pact that commits the 14 OPEC nations and 10 allied countries to a collective 1.2 million-barrel output curb.

"Saudi Arabia has signalled that it seeks stricter compliance by other producers and is no longer willing to shoulder the burden of sub-compliance by others, such as Russia, Iraq and Kazakhstan, which have all failed to reach 100 per cent compliance with their target cuts", Tonhaugen said. "Granted, there's some unrest going on in the country, but I don't think they'll voluntarily reduce".

"Ongoing concerns over the global economy and the US-China trade war continue to weigh on prices but US crude inventories are expected to have declined last week which may lend some support", Phil Flynn, analyst at Price Futures Group in Chicago, said in a note.

While Opec may cut output, U.S. producers have been happy to meet any market shortfalls with record-setting output.

In the meantime, Russia, which is not part of OPEC but has continued to expand its lead in production limits in recent years, has announced that it wishes to recalculate oil production in line with OPEC countries.

"If anything goes wrong with Saudi production over the next few months and the likelihood of something happening is pretty high ... Russia's going to be the first party looking to fill that gap", Heldman said.

  • Darren Santiago