OPEC considering return to production cuts due to slumping oil prices

OPEC considering return to production cuts due to slumping oil prices Photo: Priwo

An unexpected drop in oil prices (Brent has lost almost a quarter of its price in a month) prompted OPEC to return to the idea of limiting crude production. However, Russia may ignore the deal this time. The cartel will meet to set next year's policy in Vienna on 6 December.

OPEC and its partners are discussing a proposal to cut oil output again, says Reuters. According to industry sources, the reduction can total 1,4 million bpd, and Russia may not be on board for such a deal. Just months after increasing production, OPEC is eyeing a U-turn, as slowing demand and record supply from Saudi Arabia, Russia and the United States caused a drop in oil prices that has surprised many oil market participants. At the beginning of October, Brent crude showed a four-year high of $86 per barrel. Some traders were even talking of $100 oil, but last Wednesday, it traded only at $66 per barrel.

The possibility of a cut was discussed by energy ministers from Saudi Arabia, Russia and other nations in Abu Dhabi on Sunday, the cartel sources claim. The sources declined to be identified by name, as the talks were confidential. However, OPEC and its partners have not settled on a final figure. ''I believe a cut of 1,4 million bpd is more reasonable than above it or below it,'' said one of the sources, while the other one stated it could be larger than 1,4 million bpd, which is equal to 1,4% of global demand.

''We have to look into long-term development, into how the price will be stabilised,'' said Minister of Energy Aleksandr Novak in Singapore on Wednesday. Photo: kremlin.ru

''We are talking about a cut from everyone, including Nigeria and Libya, because their production has exceeded the cap in recent months,'' one source said. The two countries are exempt from the current supply limiting deal due to economic difficulties. Iran might not be called upon to deliver a voluntary cut, as it is already facing lower exports due to the latest US sanctions. As for Russia, it is unclear if it will join another round of supply cuts. ''There are a few challenges to the proposal and Russia is one of them,'' one of the sources told Reuters.

''The market is quite volatile today. We remember that the oil price was sharply rising in the same way, now it is going down. We have to look into long-term development, into how the price will be stabilised,'' said Russian Minister of Energy Aleksandr Novak in Singapore on Wednesday. Nonetheless, OPEC officials hope Moscow will support the initiative.

If the world's top producers finally agree to apply new limitations, the move is likely to displease US President Donald Trump, who has urged the cartel not to cut supply. Simultaneously, it would further support US shale oil production.

By Anna Litvina

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